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India raises excise duty on fuel to curtail export by private fuel retailers


In a bid to regulate fuel prices in the domestic market, the government on Friday raised excise duty on export of petrol, diesel and Aviation Turbine Fuel (ATF) from 1 July 2022. It has raised excise by Rs. 6 per litre on ATF, Rs 6 per litre on petrol and Rs 13 per litre on diesel. The government will charge a cess of Rs. 23250 per tonne on crude. Import of crude would not be subject to this cess. 

“This cess will have no adverse impact, whatsoever, on domestic petroleum products/fuel prices. Further, small producers, whose annual production of crude in the preceding financial year is less than 2 million barrels will be exempt from this cess,” said the government in a notification.  The decision seems to have been taken after private fuel retailers like Jio-BP and Nayara Energy reportedly exported oil to other countries, after acquiring cheap crude from Russia. 

Ever since western countries sanctioned Russian oil and gas, following its military operations in Ukraine, India has raised its oil import from Russia manifold. It is estimated that crude oil imports from Russia surged by 286% in the January-April 2022 period. In previous years, India's imports of oil and gas stood at 2% or less.  Subsequently, private refiners reportedly increased exports to Europe and the US, where they are making profit margins of $14-15 per barrel on refined products from Ural/Russian crude oil. However, this is impacting the Indian market too

“The refiners export these products at globally prevailing prices, which are very high. As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market. In view of this, cesses equal to Rs 6 per litre on Petrol and Rs 13 per litre on diesel have been imposed on their exports. These cesses would apply to any export of diesel and Petrol from the country,” said the government.

Last month, there were several reports that petrol pumps operated by state-owned fuel retailers were going out of stock in Madhya Pradesh, Rajasthan, Karnataka and Gujarat due to sudden surge in demand. The reason was that private fuel retailers like Jio-BP and Nayara Energy raised prices at some locations or curtailed their sales. Therefore, people are opting for state-owned petrol pumps Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), who are selling petrol and diesel at lower rates (Rs. 15-25 a litre lower than private pumps).

To stop this, the government has expanded the scope of Universal Service Obligation (USO), which mandates licensed entities to maintain petrol and diesel sales at all petrol pumps, including in remote areas, for specified working hours. Following the government’s order these companies will be obligated to extend the USO to all the retail consumers at all the retail outlets.

"Failure to meet norms can lead to the cancellation of licences… This has been done with an objective to ensure a higher level of customer services in the market and to ensure that adherence to the USO forms a part of the market discipline," said the ministry in a statement. These USOs include maintaining supplies of petrol and diesel throughout the specified working hours and of specified quality and quantity; making available minimum facilities as specified by the Central government, the ministry said.