India Slaps Export Duty on Diesel and ATF as Crude Hits $120 — Refiners Face a Double Squeeze, Airlines Could Get Relief

India Slaps Export Duty on Diesel and ATF as Crude Hits $120 — Refiners Face a Double Squeeze, Airlines Could Get Relief

With Brent crude surging past $120 per barrel amid escalating US-Iran tensions, the Indian government moved swiftly on April 30, imposing export duties of ₹23 per litre on diesel and ₹33 per litre on aviation turbine fuel (ATF). Petrol exports remain untaxed. The goal: keep domestic fuel supply stable and prevent refiners from chasing higher international margins at the expense of the Indian consumer.

This is not the first time India has reached for this lever. In July 2022, a similar windfall tax on petroleum product exports rattled refining stocks. What do company filings tell us about who stands to lose — and who might quietly benefit?

The Refiners: Déjà Vu for CHENNPETRO and MRPL

Chennai Petroleum Corporation (CHENNPETRO) knows this pain firsthand. In its Q4 FY23 quarterly results, the company explicitly noted: "The Government of India w.e.f. 01.07.2022, levied Duties on Export of Petroleum products at rates notified on fortnightly basis... This has resulted in lower revenue realisations with significant impact on the profitability." CHENNPETRO reported a GRM (gross refining margin) of US$12.48 per barrel for Q4 FY23 and US$11.91 for the full year, but those margins were already dented by the earlier export levy. With diesel and ATF now carrying even steeper duties, the pressure on its bottom line will be familiar — and painful. Mangalore Refinery and Petrochemicals (MRPL) is particularly exposed. Per its FY25 annual report, MRPL processed a record 18.04 million metric tonnes (MMT) of crude — 120% capacity utilisation, the highest ever for a single-site PSU refinery. It produced 6.68 lakh MT of high-speed diesel (HSD) and 2.72 lakh MT of ATF in FY25. The company also flagged that product crack spreads (the difference between crude and refined product prices) for HSD, ATF, and petrol fell by 42%, 36%, and 33% respectively during FY25. The new export duties squeeze margins on exactly the products MRPL relies on for revenue.

MRPL's FY24 annual report reported a GRM of US$10.36 per barrel, up from US$9.88 the prior year. But with cracks already compressing and export duties now layered on top, FY26 margins face a double squeeze: higher input costs from $120 crude and lower realisations on exported fuel.

BPCL and HPCL: Less Export Exposure, Still Vulnerable

Bharat Petroleum (BPCL) operates at a larger scale — approximately 40 MMT of annual refining throughput per its recent quarterly results — but is more domestically oriented. Hindustan Petroleum (HINDPETRO) reported exports of just 0.83 MMT against domestic sales of 10.79 MMT in a recent quarter, per its quarterly results, giving it a relatively low export ratio of about 7%.

For these oil marketing companies, the bigger threat is not the export duty itself but the underlying crude price. At $120 per barrel, their under-recovery risk on domestic fuel sales rises, especially if the government resists passing on full costs to consumers. BPCL swung from a loss of ₹4,739 crore in FY23 to a profit of ₹22,069 crore in FY24, per its quarterly filings — a reminder of how violently crude price swings move refiner earnings.

IndiGo: Fuel Is a Third of Revenue — Any Relief Matters

InterGlobe Aviation (INDIGO) is the most direct beneficiary of any policy that keeps ATF prices in check domestically. Per its FY25 annual report, IndiGo's aircraft fuel expenses totalled ₹2,61,973 million — a staggering 32.4% of its ₹8,08,030 million in revenue from operations. Fuel costs rose 9.6% year-on-year in FY25 even as crude averaged well below current levels.

At $120 crude, IndiGo's fuel bill faces enormous upward pressure. But the export duty on ATF — at ₹33 per litre, steeper than the diesel levy — is designed to keep more jet fuel in the domestic market. If this dampens ATF pricing even modestly, the impact on IndiGo's margins is meaningful. Every 1% reduction in fuel costs translates to roughly ₹2,600 million in savings, or about ₹18 per share in annual earnings impact.

IndiGo does not currently hedge fuel costs. Its FY25 annual report notes the company uses derivative instruments only for foreign exchange exposure, not commodity price risk. That means any domestic ATF price relief flows straight to the bottom line — but it also means IndiGo is fully exposed if crude keeps climbing.

The Second-Order Casualties

Beyond refiners and airlines, two companies illustrate the ripple effects.

Castrol India (CASTROLIND) derives its raw material — base oil — from the refining process. Per its FY22 annual report, when crude spiked due to the Russia-Ukraine crisis, "refiners prioritized fuel over base oil production, which led to supply shortages and scarcity." If export duties incentivize refiners to push more diesel and ATF into domestic channels, base oil production could again take a back seat, squeezing Castrol's input supply and costs. Apollo Tyres (APOLLOTYRE) flagged in its FY25 annual report that raw material costs rose 11% year-on-year after a 12% decline in FY24, driven in part by crude-linked synthetic rubber and carbon black prices. The company noted: "Most other raw materials are affected by the movement in crude prices. Rising crude oil prices and increasing raw material costs may affect the profitability of the Company." At $120 crude, that warning rings louder.

What Retail Investors Should Do

The export duty is a short-term policy tool, not a structural shift — India removed the 2022 levies within months as crude cooled. Investors should not panic-sell refining stocks, but should recognise that MRPL and CHENNPETRO carry the most export exposure among PSU refiners and will feel the pinch first. BPCL and HPCL are more insulated but vulnerable to the broader crude shock.

For IndiGo, the ATF export duty is a modest positive, but the real risk remains crude at $120. Watch for quarterly fuel cost disclosures — if ATF prices soften relative to crude, the export duty is working. If they don't, IndiGo's margin pressure persists regardless.

Companies like Castrol and Apollo Tyres are second-order victims of the crude surge, not the export duty specifically. Their stocks tend to lag crude moves by one to two quarters as inventory buffers absorb initial price changes. The time to worry is if crude stays elevated through Q2 FY27.

Data sourced from company filings on NSE via Xaro.