Fuel duty cuts can power export hike

Reductions in export duties on petrol, diesel and jet fuel announced on Sunday should help restore shipments to Europe. Duties were increased to ensure an adequate domestic supply following the war in West Asia. India is a key intermediary in the global oil trade, and its exports should benefit from high crude oil prices and a depreciating rupee. Fuel shortages are forcing the EU and Britain to soften their stance on not importing Russian crude refined in India. Exports to West Asia, the other significant destination for India's refined petroleum products, will struggle till the Hormuz Strait is closed. The higher export value can partly offset disruption in the volume of India's fuel exports as consuming economies start rebuilding reserves of crude oil and refined petroleum.

Resumption of fuel exports underscores India's efforts to diversify its energy sourcing, an effort that gained momentum from Ukraine and Iran wars. The switch to Russian crude and rising supplies from Africa and North and South America lessen India's reliance on its traditional yet politically sensitive suppliers in the Persian Gulf. This should help with the recovery of India's petroleum exports as crude oil supply from West Asia is restored after the Hormuz Strait reopens. Indian refiners have more secure fuel supplies for clients who will be seeking supply chain resilience in a post-conflict oil market.

The other fallout from global energy conflict is India's tilt towards RE to reduce its import vulnerabilities. This, too, should work in favour of fuel exports over a longer term. The country has an ambitious plan to add petroleum refining capacity, which can feed exports if power grid improvements allow better evacuation of installed solar capacity.