How petroleum products are boosting India’s export growth
India's merchandise exports recorded growth of nearly 20% year-on-year over the reference period, according to official trade data
Petroleum products emerged as the single largest driver of this export growth, reflecting higher refined-fuel shipments
Non-petroleum, non-gems-and-jewellery exports also grew, but at a comparatively modest pace, indicating only marginal progress on export diversification
Sectors such as engineering goods, electronics, chemicals, and pharmaceuticals contributed to the non-oil export base, though petroleum's outsized share continues to concentrate export growth in a single, price-sensitive commodity category
India's Refining Capacity and the "Buy Crude, Sell Refined" Export Model
India has limited domestic crude oil reserves but very large refining capacity, making it a major net importer of crude oil and a major net exporter of refined petroleum products. Refiners import discounted crude (increasingly from Russia since 2022), process it domestically, and export refined products such as diesel, petrol, and aviation turbine fuel (ATF) — this model allows export growth even when India is a crude-deficient country.
Key Details
- India's installed refining capacity is among the largest in the world; Reliance's Jamnagar refinery complex (Gujarat) alone has a capacity of roughly 1.24-1.4 million barrels per day, including a large export-oriented unit under SEZ status
- Since 2022, India significantly increased imports of discounted Russian crude following Western sanctions on Russia post the Ukraine conflict, improving refiners' gross refining margins (GRMs)
- Refined products (diesel, petrol, jet fuel, naphtha) are then exported globally, including to markets that restrict direct imports of Russian-origin crude but permit refined products made in a third country
- Mineral fuels and refined petroleum have consistently ranked among India's top export categories by value
The reported export growth being led by petroleum products reflects this refining-arbitrage model — India converts cheaper imported crude into higher-value refined exports, which shows up as strong headline export growth without reflecting broader manufacturing competitiveness.
Windfall Tax (Special Additional Excise Duty) on Petroleum Exports
The Special Additional Excise Duty (SAED), commonly called the "windfall tax," was a levy on domestically produced crude oil and on exports of petrol, diesel, and ATF, introduced to capture extraordinary refiner profits during price spikes. Its trajectory — imposed, revised repeatedly, then scrapped — is a case study in how fiscal policy responds to global commodity price swings and affects export incentives.
Key Details
- Introduced in July 2022 amid the global crude price surge following the Russia-Ukraine conflict
- Revised roughly fortnightly based on international crude and product price benchmarks
- Revenue collected fell sharply as prices normalised: from about ₹25,000 crore in FY23 to about ₹6,000 crore in FY25
- The levy on domestic crude production and the export duties on refined petroleum products were withdrawn in December 2024, removing a fiscal drag on petroleum export margins
The removal of export duties on refined fuels ahead of this reporting period is a structural reason petroleum product exports could rise sharply, since exporters no longer absorb a windfall levy on shipments.
Export Diversification and the Foreign Trade Policy (FTP) 2023 Target
India's Foreign Trade Policy 2023 (effective April 1, 2023) set a target of $2 trillion in total exports by 2030 — split roughly equally between $1 trillion in merchandise exports and $1 trillion in services exports — with an explicit push to diversify the export basket away from concentration in a few commodities and destination markets.
Key Details
- FTP 2023 has no fixed end date; it is designed as a dynamic, continuously updated policy (a break from the earlier five-year policy cycles)
- Diversification is tracked partly through new "market-product combinations" — India added over 1,800 new such combinations in a recent fiscal year, according to trade data
- Non-petroleum, non-gems-and-jewellery exports are the standard analytical benchmark economists use to assess genuine, broad-based export diversification, since petroleum and gems/jewellery values are highly sensitive to global commodity price swings rather than manufacturing competitiveness
- Sectors prioritised for diversification include engineering goods, electronics, pharmaceuticals, chemicals, and textiles
The finding that headline export growth is petroleum-led while diversification is only "marginal" is precisely the gap the FTP 2023 target is meant to close — strong topline growth driven by one refining-arbitrage commodity does not by itself indicate progress toward a diversified $1 trillion merchandise export base.
- Reported merchandise export growth: nearly 20% year-on-year, led by petroleum products
- SAED (windfall tax) on petroleum introduced: July 2022; withdrawn (domestic crude levy and export duties on fuels): December 2024
- SAED revenue collection fell from about ₹25,000 crore (FY23) to about ₹6,000 crore (FY25)
- FTP 2023 target: $2 trillion total exports by 2030 ($1 trillion merchandise + $1 trillion services)
- Reliance's Jamnagar refinery complex has a capacity of roughly 1.24-1.4 million barrels per day, among the largest single-site refining complexes globally