Overview of Duty Reductions#
On Thursday, India announced a reduction in export duties on diesel and aviation turbine fuel. This move aims to alleviate some financial pressure on exporters while maintaining the current duties on domestic petrol and diesel consumption.
Details of the Changes#
The export duty on diesel has been cut from 55.5 rupees (approximately $0.67) per litre to 23 rupees (around $0.24). Similarly, the export duty on aviation turbine fuel has decreased from 42 rupees to 33 rupees. Notably, the export duties on petrol remain at zero, and the domestic duties for petrol and diesel have not changed.
Context of the Decision#
India, which ranks as the third-largest oil importer and consumer globally, has been dealing with rising oil prices. This situation has been exacerbated by geopolitical tensions, particularly following the closure of the Strait of Hormuz due to the U.S.-Israeli conflict with Iran. As a result, crude oil prices surged to $120 per barrel earlier this month, impacting profit margins for retailers selling gasoline and gasoil.
Impact on Consumers and Airlines#
To protect consumers from fluctuating global oil prices, Indian refiners have kept gasoline and gasoil prices stable for four years. Additionally, to manage rising airfares, the government imposed a cap on monthly increases in aviation turbine fuel prices for domestic airlines, limiting them to 25% since April. This is significant as jet fuel can account for up to 40% of an airline's operating costs.