Government increased export taxes on petrol, diesel, and ATF

Posted by : Avneet Dhamija | Tue Jul 05 2022

Government increased export taxes on petrol, diesel, and ATF

The government has decided to impose an export tax on petrol, diesel, and jet fuel (ATF) transported abroad by companies like Reliance Industries in order to relieve the shortage of local fuel supplies. Additionally, it has slapped a windfall tax on domestically produced crude oil generated by businesses like ONGC and Vedanta.

Another government announcement revealed that an extra tax of Rs 23,230 per tonne had been imposed on locally produced crude oil to offset producers’ windfall profits from high international oil prices. “The cost of crude has significantly increased recently. Domestic oil producers offer their product to domestic refineries at prices that are competitive internationally. Thus, domestic crude producers are benefiting unexpectedly. Acess of Rs 23,250 per tonne has been placed on oil in consideration of this. According to the administration, imports of oil would not be subject to this cess.

Reasons for increasing Export Tax on fuel by Central Gov

Nirmala Sitharaman, the union finance minister, explained the tariffs, saying although they were pleased with the profits fuel exporting firms were generating, the tax measures were necessary because of the “exceptional circumstances” we are living in. “International oil prices are currently out of control. They simply keep moving higher.

Additionally, we must spend that much money to import goods into any country, such as India, which depends heavily and significantly on imports. However, exports from India are taking place and at an unusual price, (producing) tremendous profits. We have nothing against individuals making money. However, at a time when we don’t have enough supplies in India for the exploration or refinement that is taking place there,” she said in a press conference. The Finance Ministry did not provide a date for the levy’s continuation, but it did state that it will reassess the situation every 15 days to determine how these duty modifications have affected things.

Recently, the UK imposed a 25% tax on “exceptional” revenues from the production of oil and gas in the North Sea in order to collect $6.3 billion for its assistance programme. In order to reduce inflationary pressure, the Indian government reduced the excise charge on gasoline and diesel.The cost of this action to the government was Rs. 1 lakh crore.

Following Russia’s invasion of Ukraine, oil refiners, in particular Reliance Industries and Rosneft-backed Nayara Energy, made a mint by shipping petroleum to impoverished areas like Europe and the US. They are said to have processed discounted Russian crude oil after the West spurned it and sold the fuel made from it to Europe and the US.

Market reaction on increase in Excise duty on Petrol & Diesel

Although this action might lessen the fuel scarcity at petrol stations across the nation, it would have an adverse effect on these business’ finances. After the statement, Reliance Industries Ltd.’s share price dropped by more than 7% on the BSE, ending the 1 July at Rs. 2408.95. Due to the increase in global petroleum prices, domestic crude producers are benefiting greatly. Following the release, ONGC Ltd.’s share price dropped 13.40% on the BSE. While Mangalore Refinery and Petrochemical fell 10%, Oil India fell more than 15%. The shares of Hindustan Oil Exploration Company sank more than 3%, while Chennai Petroleum Corporation plunged more than 5% on 1 July.

Retail Price in India compared to Global Prices

India is increasingly reliant on imports to meet its needs for petroleum products. For instance, net petroleum product imports were 69 % of total consumption in 1998–1999 but grew to over 95 % in 2020–21. Any change in the price of crude oil globally has a substantial influence on the domestic cost of petroleum products since imports make up a large portion of domestic consumption. The two figures below indicate the trajectory of India’s retail pricing for gasoline and diesel during the past nine years, as well as the price of global crude oil.

No alt text provided for this image
No alt text provided for this image

Implications on Stock Market

Individual firms are most obviously impacted, even though stock markets may not be as a collective. There are several causes:

Cost of Inputs Rising: Oil is a crucial input for many businesses. Naturally, input costs and overall production costs increase along with rising crude oil prices. As a result, the profit margins decline, which in turn lowers the company’s stock price. Businesses like airlines, refineries, logistics, paints, and others are most negatively impacted.

Current Account Deficit: A significant share of India’s overall imports are made up of oil. Foreign currency begins to leave the country once the current account imbalance widens. The rupee weakens as a result of this. As a result, imports are now more expensive since the government will have to spend more money to obtain the same amount as before. Import costs rise, input costs rise, and stock prices decline once more.

Increase in Transportation Costs: As the price of crude oil rises, transportation costs will also go up, raising the company’s expenses. Once more, this suggests that profit margins will be less and stock prices will drop. In contrast, a decline in oil prices will result in a rise in stock prices.

Rise in Inflation: Investors lose faith in companies when inflation rises, which has a negative impact on stock values. On the other hand, a decline in oil prices increases investor confidence and benefits stock prices.

Further planning on Taxes on Fuel

For the fiscal year ending March 31, 2023, the government drafted new regulations mandating oil businesses exporting gasoline to sell in the domestic market the equivalent of 50% of the volume supplied to clients abroad. This criterion has been set at 30% of the amount shipped for diesel.

These export limitations also serve to replenish domestic gasoline supplies at gas stations, some of which had run out in states like Gujarat, Madhya Pradesh, and Rajasthan as private refiners preferred to sell fuel abroad rather than domestically.

Exports were favoured since retail prices for petrol and diesel at major PSU merchants were limited at levels well below their actual costs. As a result, private merchants, who hold less than 10% of the market, are forced to sell fuel at a loss or risk losing market share if they offer it at a higher price. Domestic producers that sell oil to local refineries at international parity rates have profited from the recent strong surge in crude prices.

Additionally, a cess of Rs 6 per litre has been levied on aviation turbine fuel (ATF). However, according to the government, there won’t be any price increases in the domestic market as a result of these actions.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

You may also like: Automobile sector shares

icon

100% Safe & Secure Platform.

Univest encrypts all data and transactions to ensure a completely secure experience for our members.

Copyright

2025 Univest. All rights reserved. | Designed with ❤️ in India
About Univest
About: Univest is a cutting-edge stock market platform designed to help traders and investors maximize their returns with expert-driven advisory services and seamless trading execution. Whether you're a seasoned trader or just starting, Univest simplifies your investment journey with actionable trade recommendations, AI-powered portfolio insights, and a fully integrated brokerage experience. With Univest, you gain access to proven stock market advisory, offering expert trade ideas for stocks, futures, options, and commodities. Our one-click trade execution feature eliminates slippage, ensuring instant execution through our advisory-first brokerage. Smart portfolio management allows you to identify underperforming stocks, optimize your investments, and receive real-time alerts. Additionally, Univest provides seamless investment opportunities beyond stocks, including mutual funds, bonds, fixed deposits, and insurance (coming soon). Join over 40 lakh active investors who trust Univest to make informed and profitable trading decisions. Start investing smarter today! 🚀  
Attention Investors : To ensure a smooth trading experience and prevent unauthorized transactions, investors must update their mobile number and email ID with their stockbroker or depository participant. As per regulatory requirements, investors are required to pay a stipulated amount as an upfront margin for trading in the Cash/FO segment. We encourage all investors to regularly check their securities in the Consolidated Account Statement (CAS) issued by depository to verify their holdings.Always verify alerts and transaction details received directly from the exchange or NSDL before proceeding with any trades. Please do not make payments through unverified email links, WhatsApp, or SMS. Always trade through a registered stockbroker and verify all details before making financial decisions.
 
Disclaimer: Investments in the securities market are subject to market risks. Please read all related documents carefully before investing. Brokerage will not exceed the SEBI prescribed limit. For more disclaimer /disclosure, visit https://univest.in/stock-broker or Univest App.We collect and use your contact information for legitimate business purposes, including providing updates on our products and services. We do not sell or rent your contact information to third parties. By submitting your details, you authorize us to contact you via Call/SMS, even if you are registered under DND. This authorization remains valid for 12 months.For grievances, please contact us at hello@unibrokers.in .
 
Univest Stock Broking Disclosures
Univest Stock Broking Private Limited - SEBI Reg. No. INZ000317437 (Stock Broker), NSE TM Code: 90392, BSE TM Code: 6866, MCX TM Code: 57290 and ICCL- Self Clearing Member Code: 6866, SEBI Reg. No. IN-DP-779-2024 (Participant), NSDL DP ID: IN304748.
 Risk Disclosures on Derivatives
1. 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
2. On an average, loss makers registered net trading loss close to ₹ 50,000
3. Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
4. Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Attention Investors: As per NSE circular dated July 6, 2022: https://nsearchives.nseindia.com/content/circulars/INSP52900.pdf, BSE circular dated July 6, 2022: https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20220706-55, MCX circular dated July 11, 2022: https://www.mcxindia.com/docs/default-source/circulars/english/2022/july/circular-418-2022.pdf?sfvrsn=9401991_0, investors are cautioned to abstain them from dealing in any schemes of unauthorised collective investments/portfolio management, indicative/ guaranteed/fixed returns / payments etc. 
Investors are further cautioned to avoid practices like:
a. Sharing 
i) trading credentials – login id and passwords including OTPs.
ii) trading strategies,
iii) position details.
b. Trading in leveraged products /derivatives like Options without proper understanding, which could lead to losses.
c. Writing/ selling options or trading in option strategies based on tips, without basic knowledge and understanding of the product and its risks.
d. Dealing in unsolicited tips through platforms like Whatsapp, Telegram, Instagram, YouTube, Facebook, SMS, calls, etc.
e. Trading / Trading in “Options” based on recommendations from unauthorised / unregistered investment advisors and influencers.
 Kindly read the Advisory Guidelines For Investors as prescribed by the Exchange with reference to their circular dated 27th August, 2021 regarding investor awareness and safeguarding client’s assets: https://nsearchives.nseindia.com/content/circulars/INSP49434.pdf
Kindly, read the advisory as prescribed by the Exchange with reference to their circular: NSE/ISC/51035 dated January 14, 2022 regarding Updation of mandatory KYC fields by March 31, 2022: https://www.nseindia.com/resources/exchange-communication-circulars# 
Attention Investors: Prevent unauthorised transactions in your Demat account by updating your mobile number with your depository participant. Receive alerts on your registered mobile number for debit and other important transactions in your Demat account directly from NSDL on the same day. Prevent unauthorised transactions in your Trading account by updating your mobile numbers/email addresses with your stock brokers. Receive information on your transactions directly from the Exchange on your mobile/email at the end of the day. Issued in the interest of investors. KYC is a one-time exercise while dealing in securities markets - once KYC is done through a SEBI-registered intermediary (Broker, DP), you need not undergo the same process again when you approach another intermediary. As a business, we don’t give stock tips and have not authorised anyone to trade on behalf of others. If you find anyone claiming to be part of Univest Stock Broking Private Limited and offering such services, please send us an email at hello@unibrokers.in
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor’s account.
Update your email ID and mobile number with your stockbroker/depository participant and receive an OTP directly from the depository on your registered email ID and/or mobile number. Check your securities/mutual funds/bonds in the Consolidated Account Statement (CAS) issued by NSDL every month.
Attention Investors: SEBI has established an Online Dispute Resolution Portal (ODR Portal) for resolving disputes in the Indian Securities Market. This circular streamlines the existing dispute resolution mechanism, offering online conciliation and arbitration, benefiting investors and listed companies https://www.sebi.gov.in/legal/circulars/jul-2023/online-resolution-of-disputes-in-the- indian-securities-market_74794.html. ODR portal for Investors - https://smartodr.in/login.
Procedure to file a complaint on SEBI SCORES: Register on SCORES portal. Mandatory details for filing complaints on SCORES: Name, PAN, Address, Mobile Number, E-mail ID. Benefits: Effective Communication, Speedy redressal of the grievances.
General
arrow down