The ongoing blockade of the Strait of Hormuz by Iranian forces has triggered a drastic intervention in the world’s third-largest energy market. As global crude prices spiral out of control due to the U.S.-Israeli conflict with Iran, the Indian government abruptly imposed a special additional excise duty on fuel exports. Simultaneously, New Delhi slashed domestic fuel taxes to shield local consumers from the geopolitical fallout.
Central Board of Indirect Taxes and Customs Chairman Vivek Chaturvedi confirmed the new windfall tax rates are set at ₹21.5 per litre for diesel and ₹29.5 per litre for Aviation Turbine Fuel. These export levies are designed to force domestic refineries to keep fuel inside the country rather than chasing lucrative overseas margins. The policy will be reviewed on a fortnightly basis.
Shielding the Domestic Market
India imports over 90% of its crude oil requirements. The sudden closure of the Hormuz chokepoint left the nation heavily exposed to the global supply shock. To prevent domestic shortages and temper inflationary pressures, the government paired the export penalty with massive domestic tax relief.
The central excise duty on both petrol and diesel was cut by ₹10 per litre. The duty on domestic diesel now sits at zero. Petrol drops to ₹3 per litre.
This domestic duty cut comes at a steep price. The move is projected to cost the exchequer approximately ₹7,000 crore over the next two weeks. The government estimates the new export levies will generate ₹1,500 crore in revenue during the same 15-day window to partially offset the massive loss.
Relief for State-Run Refineries
State-run oil marketing companies are currently absorbing massive losses at the pump. International crude prices are skyrocketing. These companies have not passed the soaring costs onto the common consumer.
#Watch | The government will review the special additional excise duty (SAED), or windfall tax, on diesel and aviation turbine fuel (ATF) every fortnight, Vivek Chaturvedi, Chairman of the Central Board of Indirect Taxes and Customs (CBIC), said on Friday.
He said the export… pic.twitter.com/eeYijxZrwy
— Fortune India (@FortuneIndia) March 27, 2026
The fortnightly review mechanism gives the government flexibility. If international crude prices stabilize or the Hormuz blockade eases, the CBIC can rapidly adjust or remove the windfall taxes without requiring separate legislative approval.