India has implemented significant policy changes to enhance its diesel export competitiveness, cutting diesel export duty from ₹16 per litre to ₹8.5 per litre effective October 16, according to a government notification issued late Thursday night. Simultaneously, petrol export windfall tax was raised to ₹2.5 per litre from ₹0.5 per litre, as reported by IANS. These adjustments come amid changing global crude oil prices and represent the government's response to market dynamics. The export duties are currently reviewed every fortnight and adjusted in line with movements in international crude oil and petroleum product prices, providing flexibility to respond to global supply disruptions. The windfall taxes on fuel exports were first imposed in July 2022 but were withdrawn two years later, with duties reintroduced in March 2026 to address surging energy prices during the US-Israeli war on Iran.
India has emerged as the world's second-largest seaborne diesel exporter in 2026 so far, accounting for roughly 10% of global shipments and trailing only the US, according to reports from NDTV Profit. The country exported approximately 620,000 barrels of diesel per day in September, marking its highest monthly rate in a year. Nearly half of India's diesel exports went to Europe, demonstrating the country's strategic role in addressing global supply shortages. The latest policy changes are expected to further enhance India's competitive position in the global diesel market.
The latest changes represent the third major revision in just two months, highlighting the volatile nature of fuel export duties amid global supply disruptions. In August, the government raised petrol export duty to ₹3.5 per litre from ₹2.5 per litre and increased diesel export levy to ₹25.5 per litre from ₹15.5 per litre. September brought reductions with petrol duty cut to ₹0.5 per litre from ₹3 per litre and diesel export levy lowered to ₹1 per litre from ₹3 per litre. The current October revision takes petrol back up from the September level while bringing diesel duty down further, reflecting the government's responsive approach to market conditions.
Russian diesel exports have resumed following an agreement with US President Donald Trump, with Russian diesel shipments beginning from the Baltic port of Primorsk on October 13, according to shipping data cited by Reuters. Trump announced that Russia would immediately supply more than 300,000 metric tonnes (2.25 million barrels) of diesel to US and global markets, followed by another 500,000 tonnes in November and a further 1 million tonnes immediately thereafter. However, these initial volumes would amount to less than a day's supply for the US transport sector alone, which consumes around 2.94 million barrels daily.
The global diesel market faces severe pressure from multiple conflicts, with combined oil flows through the Strait of Hormuz, Bab al-Mandeb and the Suez Canal falling to 9.99 million barrels per day in September, representing a 61% decline from February pre-war levels, as reported by NDTV Profit. The Russia-Ukraine war has further strained supplies, with Ukrainian drone attacks leaving about half of Russia's refining capacity offline by late August, according to S&P Global Energy. By September, three of Russia's six largest diesel-producing refineries had halted or reduced output.
The supply disruptions have translated into significant market effects, with European diesel prices more than doubling from pre-war levels and US distillate inventories falling to their lowest September level since 1982, according to NDTV Profit. The IEA reports that record diesel prices are already having broad economic consequences by raising the cost of goods and impacting real incomes, economic activity, and inflation. US President Donald Trump's administration has told European Union countries to draw down inventories or face a potential US diesel export ban, highlighting the political pressure from these record-high prices.
