India softens export taxes on diesel, jet fuel as global oil volatility persists amid Iran war

India has reduced export duties on diesel and aviation turbine fuel (ATF), even as it keeps domestic fuel taxes unchanged, in a calibrated move aimed at stabilising refinery margins and maintaining export competitiveness amid prolonged global oil volatility triggered by the West Asia conflict and shifting crude trade flows.

The government has cut the export duty on diesel to Rs 23 per litre from Rs 55.5 per litre and reduced the levy on ATF to Rs 33 per litre from Rs 42 per litre. The export duty on petrol remains nil, while domestic fuel taxation has been left unchanged.

The adjustment comes at a time when global oil markets continue to be shaped by disruptions linked to the Iran war, volatility in the Strait of Hormuz, and evolving supply routes involving Russia, West Asia, and Latin America.

Premiums on Russian crude have fallen to below $5 per barrel, compared to more than $10 per barrel a month earlier. In the same period last year, Russian crude was available at discounts of $2–4 per barrel.

The United States had temporarily waived sanctions on Russian oil exports for 30 days in March, later extending it by another month, helping maintain global supply liquidity.

West Asia benchmarks normalise after extreme spike

Pricing benchmarks in West Asia have also stabilised after sharp spikes during the height of the conflict. The Platts Dubai/Oman benchmark — used to price more than half of India’s crude imports — had surged to $145–160 per barrel last month but has since moderated to levels comparable with or even below Brent crude, officials said.

Saudi Arabia, India’s second-largest crude supplier after Russia in April, shipped about 700,000 barrels per day, data showed. State-owned Saudi Aramco had sharply raised formula prices for May loadings, increasing Arab Light premiums by $19.50 per barrel, before expectations emerged that June pricing may soften.

Supply diversification eases pressure on Indian refiners

The global supply landscape has also shifted due to higher flows from multiple regions, reducing dependence on any single source. Indian refiners have increased procurement from Russia, West Asia, Africa, and Latin America to balance disruptions in traditional routes.

Before the conflict escalation, India was importing close to 3 million barrels per day from West Asia, much of it transiting through the Strait of Hormuz. That volume has since dropped to around 1.2 million barrels per day in March and April, according to Kpler data, as shipping routes and insurance costs were disrupted.

UAE’s exit from OPEC adds long-term supply flexibility

Adding to shifting oil market dynamics, the United Arab Emirates’
decision to exit OPEC and OPEC+ is expected to gradually increase production flexibility outside cartel quotas, potentially boosting global supply in the medium term.

Analysts say this could benefit import-dependent countries like India by easing price pressures over time, even though immediate market impacts remain limited due to ongoing geopolitical instability.

Refiners adapt to margin-driven export strategy

India’s refiners have also adjusted output strategies to capitalise on strong middle-distillate margins. Diesel exports surged 20 per cent in March as refiners increased shipments to Southeast Asia amid strong crack spreads, even as total refined product exports declined.

Jet fuel remains a key pressure point, accounting for up to 40 per cent of airline operating costs, prompting the government to cap monthly ATF price increases for domestic airlines at 25 per cent in April.