India’s elimination of the excise duty on high-flash high-speed diesel and marine gas oil supplied to foreign ships, effective Dec. 3, is expected to boost vessel traffic to Indian ports that had previously been diverted to other locations due to high taxation.

“The proposed changes under Rule 18 and Rule 19 of the excise law will reinstate the eligibility of HFHSD and MGO to be supplied under a rebate of duty or for export without payment of duty, similar to the regulations in place prior to July 2022,” the Ministry of Finance said in a letter to Indian refiners seen by S&P Global Commodity Insights.

The decision to remove the tax comes as global crude oil prices have stabilized between $70/b and $75/b, down significantly from more than $100/b that initially prompted the levy of Rupees 15.80/liter ($230/mt) on July 1, 2022.

Stronger Brent crude prices in 2022 led private refiners to significantly decrease the domestic supply of transportation fuels, as they reaped higher profits from exports following a surge in overseas demand.

Hindustan Petroleum Corp. Ltd. said the company will offer various MGO grades, including biofuel blends such as B20, in both distillate and residual fuels. “With the ongoing expansion of our Vizag refinery, we are positioned to enhance our market share in this crucial segment,” an HPCL spokesperson said in a statement.

Another source close to a refinery said Indian ports are expected to become an attractive option for foreign ships seeking refueling services, and “we aim to leverage India’s surplus in gas oil production to deliver more competitive pricing.”

Delivered low sulfur marine gasoil prices were heard at around $770/mt on Dec. 5, down $260/mt from Platts’ assessment, which included the duty on Dec. 4. Platts is part of Commodity Insights.

“[The removal of the duty] is great news for attracting MGO volumes to India,” a Kochi-based bunker supplier said.

“We discussed this issue at various forums, including the India Bunker Conference 2024. Now, we can compete more effectively,” the supplier said. “However, it comes with a lot of documentation requirements since the product is being supplied without excise duty, like how it was before July 2022.”

Source: Platts