Petroleum Product Exports Hit 10-Year Low, Dropping to Just 8.8% of Total Exports in FY26

In FY26, India’s export of petroleum products experienced a significant decline of 5.5% year-on-year (Y-o-Y), primarily driven by reduced shipments of diesel and aviation turbine fuel (ATF). The share of petroleum products in India’s gross exports dropped to 8.8%, marking the lowest contribution of this sector in over a decade, with exceptions noted during COVID-impacted FY21. Diesel exports fell for the third consecutive year, down 2.5% Y-o-Y to 27.32 million tonnes (mt), while ATF exports plummeted by 20.35% to 6.81 mt. Despite these challenges, petrol exports saw a slight increase of 5.31% Y-o-Y, reaching 16.67 mt. Contributing factors to the decline include sanctions on Russian crude oil derivatives by the EU and US and an increase in domestic demand coupled with refinery maintenance issues.

The decline in petroleum product exports is likely to impact the common citizen and the market in various ways. The reduction in outbound shipments may lead to increased oil trade deficits, which could affect the balance of payments and, in turn, the stability of the Indian rupee. This situation could prompt further inflationary pressures on domestic fuel prices, contributing to broader economic challenges for citizens. With Brent crude prices anticipated to rise to an average of $90-95 per barrel in FY27, the potential surge in import costs may exacerbate these issues, affecting both consumers and financial markets as they adjust to these new price dynamics.

Looking ahead, the government and the Reserve Bank of India (RBI) must address these challenges through coordinated fiscal and monetary policies. While short-term measures may focus on enhancing refinery efficiencies and exploring alternative markets for exports, long-term strategies should aim at reducing dependency on oil imports by promoting renewable energy sources and enhancing domestic production capabilities. Analysts project that unless structural changes occur, the oil trade deficit will continue to widen, thereby necessitating proactive policy adjustments to stabilize the economy amidst rising global oil prices.