The government has raised duties on diesel exports from ₹21.50 to ₹55.50 a litre and on aviation turbine fuel (ATF) from ₹29.50 to ₹42 a litre, mainly targeting private refiners who were making windfall gains through exports even as they rationed their sales in the unprofitable domestic market.
The finance ministry on Saturday issued a notification in this regard saying the levies have been increased with immediate effect according to the existing circumstances that “render it necessary to take immediate action”.
Amid the war in West Asia, the government initially levied export duties on diesel and ATF to ensure their availability “in sufficient quantities” domestically on March 27 at the rates of ₹21.50 per litre and ₹29.50 a litre, respectively.
The government decided to raise duties on the two fuels as their international oil prices soared, making exports highly lucrative as against domestic sales. Private fuel retailers preferred selling in overseas market because dominant public sector fuel retailers froze pump prices of automobile fuels in the country despite incurring huge under-recoveries on petrol and diesel.
To be sure, state-run IOC, BPCL and HPCL enjoy near monopoly in domestic fuel retailing with about 90% market-share. As domestic sales is a loss-making business, private fuel retailers adopted two ways to minimize their losses, people aware of the matter said, requesting anonymity.
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Some private retailers raised rates of petroleum products marginally by ₹3-5 a litre to dissuade customers from visiting their outlets when cheaper fuels are available at nearby public sector OMCs.
Other private companies started dispensing only limited quantity of fuel (particularly diesel) to every customer in a day, thus minimising their losses, Mint reported on Saturday. Most of the private refiners, however, raised exports of petroleum products for windfall gain, they added.
According to a petroleum ministry’s April 2 statement, state-run oil marketing companies were losing ₹24.40 per litre revenue on the sale of petrol and ₹104.99 a litre on diesel. Per litre under-recoveries on any petroleum product is calculated vis-à-vis its benchmark rate in the international market.
Similarly, state-run OMCs initially raised rates of ATF by over 100% for both domestic and foreign airlines to check their revenue losses. On April 1, they initially raised ATF price for airlines plying on domestic routes by 114.55% from ₹96,638.14 per kilo litre to ₹207,341.22 per KL in Delhi, and for foreign carriers by 107% from $816.91 per KL in Delhi to $1,690.81 a KL (1 KL is equal to 1,000 litres).
Later in the day, they moderated ATF prices with a minor 8.6% hike on domestic routes in order to protect consumers from an unprecedented hike in domestic airfares. Thus, ATF price in Delhi for scheduled domestic airlines such as IndiGo, SpiceJet and Air India brought down to ₹1,04,927 per KL.