With domestic production of petrol and diesel normalizing and supply exceeding demand, the government has provided significant relief to companies by reducing the tax on exported fuel. An order has been issued to lower the windfall tax on exported petrol, diesel, and aviation fuel, effective Saturday. Under this order, the tax on diesel has been reduced from ₹25.5 to ₹24 per litre, while the tax on petrol has been cut from ₹3.5 to zero. The tax on aviation fuel has also been lowered from ₹22 per litre to ₹19.5 per litre.

The government reviews the windfall tax on petrol, diesel, and Aviation Turbine Fuel (ATF) every fortnight. These rates are determined based on the international market prices of crude oil and other petroleum products. The government first imposed a windfall tax on fuel exports in July 2022. The objective was to curb the massive profits oil companies and refineries were making through fuel exports. When global oil prices surge, Indian companies often earn huge profits by exporting their products.

**Will fuel become cheaper in the country?**
The reduction in windfall tax will not impact domestic fuel prices. This tax cut applies only to fuel exported from the country, directly benefiting oil companies and refineries. Although the government had previously abolished the windfall tax, it was reintroduced in March 2026 as oil prices in the global market began to skyrocket—driven by tensions involving Iran and the US—raising concerns that Indian companies might ramp up exports. The government reimposed the windfall tax specifically to curb these exports.

**Tax was hiked earlier this month**
The government had actually raised the windfall tax earlier this month. On August 3, the tax on diesel was increased to ₹25.5 per litre, up from the previous rate of ₹15.5 per litre. This implies a hike of ₹10 at once. Similarly, the windfall tax on ATF was raised from ₹14.5 to ₹22 per litre. The windfall tax on petrol was also increased from ₹2.5 to ₹3.5 per litre, but it has now been reduced to zero.

What is the purpose of this tax?
The government imposed the windfall tax to prevent companies from exporting oil out of the country in pursuit of higher profits. This tax was levied to ensure a stable domestic supply of oil. With global oil prices steadily rising over recent times, Indian oil companies and refineries have been keen to prioritize exports; the government introduced the windfall tax to curb this trend. However, this tax does not apply to oil sold within the country.

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