NEW DELHI, India: As the Indian government aims to increase local fuel supplies to meet rising demand and boost federal revenues, it has imposed a windfall tax on oil producers and refiners who have increased oil exports to benefit from higher overseas margins.

New taxes and export restrictions could further tighten global oil product supplies and high prices, as well as curb fuel exports by refiners Reliance Industries and Nayara Energy, partly-owned by Russian company Rosneft.

Among India's largest buyers of discounted Russian oil supplies, private refiners Reliance and Nayara have reported major profits by reducing domestic sales and aggressively increasing fuel exports, including to buyers in Europe, where many buyers are avoiding Russian crude imports.

Meanwhile, state refiners have increased production to meet rising local demand and sell fuel at the government-capped lower prices, while some have also issued import tenders.

After the announcement of the export restrictions and taxes of 6 rupees per liter for both gasoline and jet fuel, and 13 rupees per liter for gasoil, Mangalore Refinery and Petrochemicals shares slumped 10 percent, while Reliance shares fell as much as 8.9 percent, their largest one-day percentage decline since November 2020.

The stocks of state rivals Indian Oil Corp, Hindustan Petroleum, and Bharat Petroleum also rose.

In a statement, the Indian government said, "While crude prices have increased sharply in recent months, the prices of diesel and petrol have shown a sharper increase. The refiners export these products at globally prevailing prices, which are very high. As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market."

The new restrictions require oil companies that export gasoline to sell the equivalent of 50 percent of the amount sold overseas to the domestic market for the fiscal year ending on 31st March, 2023.

To justify a levy of 23,250 Indian rupees ($294.04) per ton on local crude sales, the government statement said, "Crude prices have risen sharply in recent months. As a result, the domestic crude producers are making windfall gains."

The new windfall tax will not apply to small exporters that produced fewer than 2 million barrels in the last fiscal year to 31st March, 2022, as well as on incremental barrels produced this fiscal year.