India unwinds fuel curbs, cuts export taxes as Gulf supply crunch eases

India is unwinding its Iran-war fuel emergency measures, one policy at a time. In 48 hours, the government lifted rationing on commercial fuel sales, cut windfall taxes on diesel and jet fuel exports, and watched private retailer Nayara Energy become the first company to reverse pump prices upward from the crisis. Each move traces back to easing pressure through the Strait of Hormuz and steadier Gulf crude flows to Indian refiners.

Private fuel retailer Nayara Energy has slashed gasoline prices by INR 5 per liter and diesel prices by INR 3 per liter across its network, ANI reports. The cut applies across more than 7k fuel stations and is the first retail fuel price reduction by any company since the Iran war.

Private cut, state-run hold: Nayara’s move reverses its 26 March hike, when the company raised fuel prices by the same amounts after the Iran conflict pushed up international oil prices. State-run retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation, and Hindustan Petroleum Corporation — accounting for 90% of India’s over 100k fuel pumps — have not changed petrol or diesel prices yet.

The cut follows an earlier sales hit for private fuel retailers due to the price shock. Nayara’s petrol sales fell 30%, and diesel sales dropped 46% in April after its late-March hike, as consumers shifted toward cheaper state-run pumps.

Meanwhile, state-run oil-marketing companies cut commercial liquefied petroleum gas (LPG) cylinder prices by an average of INR 180 per cylinder. Domestic LPG prices were unchanged, keeping the relief limited to business and commercial users. The price cut comes after India’s Petroleum Ministry restored industrial and commercial LPG supplies to pre-crisis levels and withdrew sector-specific allocations.

Why it matters: Lower global crude oil prices are starting to feed through to parts of India’s retail fuel market as the Middle East supply shock appears to ease, but the pass-through remains uneven. State-run companies are likely to join Nayara in reducing gasoline and diesel prices in the coming days to ease inflationary pressures on the economy.

Moreover, diesel and aviation turbine fuel (ATF) exports face a lower windfall tax beginning today. The government cut the export levy on diesel by 39% and by 40% on ATF, while more than doubling the tax on gasoline exports to INR 4 from INR 1.5 per liter, Reuters reports, citing a notification from India’s Finance Ministry. Retail fuel taxes remain unchanged.

What it means: Lower export levies should improve margins for Indian refiners — including those processing large volumes of Saudi, Iraqi, and UAE crude — and could support diesel and jet fuel shipments to overseas markets.

Ending emergency fuel sales curbs

The government will also allow commercial and institutional buyers to fill up at retail stations again from today, unwinding the emergency fuel rationing it imposed only weeks ago, Reuters reports.

IN CONTEXT- Earlier this month, the Indian government barred commercial and institutional consumers from buying petrol and diesel at retail fuel stations and capped fuel sales at 200 liters per customer per day to mitigate supply shortages.