The government raised duties on diesel exports from $21.50 L $55.50 liters and on Aviation Turbine Fuel (ATF) from $29.50 LBP $42 per litre, and mainly targeted private refiners that 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 that the fees have been increased with immediate effect in accordance with the existing circumstances “which make it necessary to take immediate action”.
Amid the war in West Asia, the government initially imposed export duties on diesel and ATF to ensure they were available in “sufficient quantities” domestically on March 27 at rates $21.50 per litre $29.50 per liter respectively.
The government decided to raise customs duties on both types of fuel with the rise in global oil prices, making exports very profitable compared to domestic sales. Private sector fuel retailers preferred to sell in foreign markets because the dominant public sector fuel retailers froze motor fuel prices in the country despite incurring significant shortfall in petrol and diesel recovery.
To be sure, state-run IOCs, BPCL and HPCL enjoy a near-monopoly in domestic fuel retail with a market share of around 90%. Since domestic sales are a loss-making business, private fuel retailers have adopted two methods to cut their losses, said people familiar with the matter, who requested anonymity.
Some private retailers raised prices of petroleum products marginally $3-5 liters to discourage customers from visiting their outlets when cheaper fuel is available at OMCs near the public sector.
Mint reported on Saturday that other private companies have begun distributing only a limited amount of fuel (especially diesel) per customer in a single day, thus reducing their losses. They added that most private refining companies increased their exports of petroleum products to achieve unexpected gains.
According to an April 2 Oil Ministry statement, state-run oil marketing companies are losing out $24.40 per liter revenue from the sale of gasoline and $104.99 liters on diesel. The reduction in recovery per liter of any petroleum product is calculated against the standard rate in the international market.
Likewise, state-run OMCs initially raised ATF rates by more than 100% for domestic and foreign airlines to check their revenue losses. On April 1, they initially raised the ATF price for airlines operating domestic flights by 114.55% from $96,638.14 per kiloliter $207,341.22 per KL in Delhi, and for foreign carriers by 107% from $816.91 per KL in Delhi to $1,690.81 per KL (1 KL equals 1,000 litres).
Later in the day, they revised ATF fares with a slight increase of 8.6% on domestic flights in order to protect consumers from the unprecedented rise in domestic flight prices. Hence, the ATF price in Delhi for domestic scheduled airlines like IndiGo, SpiceJet and Air India has come down to $1,04,927 per Kuala Lumpur.
