Increased Diesel Export Tax Aims to Align Prices Between State and Private Fuel Companies in India
Diesel export tax hike may align prices of state OMCs, private cos
The Economic Times
Image: The Economic Times
The Indian government has raised the diesel export tax from ₹21.5 per litre ($37) to ₹55.5 per litre ($95), aiming to bridge the pricing gap between state-run oil marketing companies (OMCs) and private refiners. This move may resolve ongoing disputes over domestic supply prices amid high global diesel rates.
- 01The export duty on diesel has increased significantly from ₹21.5 to ₹55.5 per litre.
- 02State-run OMCs control about 90% of India's fuel retail market.
- 03The pricing gap between OMCs and private refiners has narrowed to approximately $3 per barrel.
- 04Private refiners argue that their crude acquisition costs exceed benchmark levels.
- 05The new tax may help stabilize domestic supply agreements.
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The Indian government has sharply increased the diesel export tax to ₹55.5 per litre ($95 per barrel) from ₹21.5 per litre ($37 per barrel). This decision aims to align prices between state-run oil marketing companies (OMCs) like Indian Oil, BPCL, and HPCL, which dominate about 90% of the fuel retail market, and private refiners such as Reliance Industries and Nayara Energy. Previously, OMCs sought to cap procurement costs by advocating for a pricing formula based on the Indian crude basket plus $15 per barrel, while private refiners preferred a benchmark price minus export tax. The recent tax hike has narrowed the price gap between the two sides to about $3 per barrel, down from over $20 in March. This adjustment is expected to ease tensions and facilitate domestic supply agreements as global diesel prices remain elevated.
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The increase in diesel export tax may lead to more stable domestic fuel prices, benefiting consumers and businesses reliant on diesel for transportation and logistics.
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