Government has increased duty on diesel export ₹from 21.50 ₹55.50 per liter and on Aviation Turbine Fuel (ATF) ₹from 29.50 ₹Rs 42 per litre, mainly targeting private refiners who were making windfall profits through exports even as they limited their sales in the unprofitable domestic market.
The Finance Ministry issued a notification in this regard on Saturday, saying that the levy has been increased with immediate effect as per the prevailing circumstances, which “makes it necessary to take immediate action”.
Amid the war in West Asia, the government initially imposed export duties on diesel and ATF on March 27 to ensure availability “in adequate quantities” domestically. ₹21.50 per liter and ₹29.50 per liter respectively.
The government decided to increase duties on both fuels as international oil prices rose, making exports highly attractive compared to domestic sales. Private fuel retailers preferred selling in the overseas market as major public sector fuel retailers kept pump prices of automobile fuel stable in the country despite huge under-recoveries on petrol and diesel.
To be sure, state-run IOC, BPCL and HPCL enjoy a monopoly in domestic fuel retailing with about 90% market share. Since domestic sales is a loss-making business, private fuel retailers adopted two methods to reduce their losses, people familiar with the matter said, requesting anonymity.
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Some private retailers marginally increased rates of petroleum products ₹3-5 per liter to dissuade customers from visiting their outlets when cheaper fuel is available in the nearest public sector OMC.
According to a Mint report on Saturday, other private companies started giving only a limited quantity of fuel (especially diesel) to each customer in a day, thereby reducing their losses. However, most private refiners increased exports of petroleum products to reap windfall profits.
According to the Petroleum Ministry’s April 2 statement, state-owned oil marketing companies were in losses ₹Revenue of Rs 24.40 per liter on sale of petrol and ₹Rs 104.99 per liter on diesel. Under-recovery per liter on any petroleum product is calculated on the basis of its benchmark rate in the international market.
Similarly, government OMCs initially increased ATF rates by more than 100% for both domestic and foreign airlines to curb their revenue losses. On 1 April, they initially increased the price of ATF by 114.55% for airlines operating on domestic routes. ₹96,638.14 per kilo liter ₹207,341.22 per KL in Delhi, and 107% increase from $816.91 per KL in Delhi to $1,690.81 per KL (1 KL is equal to 1,000 litres) for foreign carriers.
Later in the day, he reduced ATF prices on domestic routes by a nominal 8.6% to protect consumers from the unprecedented rise in domestic airfares. Thus, ATF price in Delhi reduced for scheduled domestic airlines like IndiGo, SpiceJet and Air India. ₹1,04,927 per kilolitre.