RIL share price tumbles 4%; govt's export duty on fuel spooks investors

RIL shares fell 4% after the govt imposed export duty on petrol and diesel. Here's why it impacts margins, stock outlook, and what analysts recommend.

Shares of Reliance Industries Ltd (RIL) fell sharply on Friday after the government’s decision to levy export duty on petrol, diesel, and aviation turbine fuel (ATF, or jet fuel) raised concerns over margins. The stock dropped nearly 5 per cent intraday before settling 4.5 per cent lower at ₹1,348.25 on the BSE.

 

RIL was the top loser in the Sensex, accounting for roughly a fifth of the benchmark’s 1,690-point (2.25 per cent) decline. Analysts said the move to levy export duty on fuel sales in international markets could dent the Mukesh Ambani-controlled conglomerate’s profitability and margins. “The levy of export duty on fuel sold in international markets will make exports costlier, hurting margins in the near term,” said Kranthi Bathini, equity strategist at WealthMills Securities.

 

 

Policy spanner in refiners’ works

 

On Friday, Union Minister for Petroleum and Natural Gas Hardeep Singh Puri said on the social media platform X that “any refinery exporting to foreign nations will have to pay export tax”.

 

Later, Union Finance Minister Nirmala Sitharaman said the government would levy duties of ₹21.5 per litre on diesel and ₹29.5 per litre on ATF to “ensure adequate availability of these products for domestic consumption”.

 

RIL exports a sizeable share of its output — petrol, diesel, and jet fuel — to global markets, where prices are typically higher than in India. The export duty, therefore, poses a risk to its revenues. The levy effectively taxes every exported barrel, reducing net realisations and putting pressure on margins, analysts said.

 

During its 2025-26 third-quarter (October-December) earnings presentation, RIL said it produced 17.7 million tonnes of refined fuel for domestic and international markets, up 1.7 per cent year-on-year (Y-o-Y). 

 

While it did not disclose the domestic-export split, the company said it maximised Jamnagar refinery throughput and domestic placements during the quarter, while capitalising on strong international refining margins (cracks) for transportation fuels. Revenue from the oil-to-chemicals (O2C) segment rose 8.4 per cent Y-o-Y to ₹1.62 trillion, while segment earnings before interest, tax, depreciation, and amortisation (Ebitda) incr­eased 14.6 per cent to ₹16,507 crore.

 

RIL said Ebitda growth in the O2C segment was driven by higher export margins for high-speed diesel and motor spirit (petrol), where spreads rose 1.5x and about 2x Y-o-Y, respectively.

 

Before the government’s announcement, analysts at Motilal Oswal Financial Services (MOFSL) had estimated that if gasoil, gasoline, and jet fuel cracks sustain at about $15/$5/$15 per barrel above historical averages in the first half of 2026-27 (FY27), RIL’s O2C Ebitda could increase by ₹17,000 crore, lifting its FY27 consolidated Ebitda estimate by nearly 8.5 per cent.

 

“Following Russia’s invasion of Ukraine in February 2022, gasoil refining margins remained elevated through 2022-23 (FY23) and 2023-24 (FY24). RIL’s consolidated O2C Ebitda rose 18 per cent Y-o-Y in FY23 and remained stable in FY24 despite flat to slightly lower production for sale. Adjusted for the windfall tax on the export of tra­n­sportation fuel, O2C Ebitda grew 30 per cent Y-o-Y in FY23,” MOFSL said.

 

However, it added that the reintroduction of export duties — similar to the July 2022 windfall tax — could cap refining margins and limit upside to O2C earnings.

 

Buy, hold, or wait?

 

With margins under pressure, analysts warned the stock could remain volatile in the near term, even as they maintain a positive long-term view. “While export duties will compress margins, investors should note that RIL has been reducing its dependence on the O2C business while expanding Reliance Retail and Reliance Jio,” Bathini said. He advised accumulating the stock on dips in a staggered manner.

 

MOFSL has a ‘buy’ rating on RIL with a target price of ₹1,750 per share. JM Financial also maintains a ‘buy’ rating with a target of ₹1,730, citing potential gains from rising global fuel prices. 

 

With diesel yield for RIL’s refinery at 40–50 per cent, the brokerage said gross refining margins could rise by $4–5 per barrel if diesel cracks sustain at $30.

 

It, however, cautioned that elevated diesel cracks carry the risk of government intervention through windfall taxes or similar duties.

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