Asia’s top diesel exporter cuts tariffs as trade gap swells

India, one of the biggest exporters of diesel in Asia, halved levies to boost shipments after the trade gap swelled to a record last month.

The government on Tuesday cut export taxes on diesel to 5 rupees ($0.06) a liter from 11 rupees, apart from slashing levies on jet fuel to zero. This is the second decrease since the tariffs were imposed July 1.

The measures come hours after data showed India’s trade deficit ballooned to a record high in July, as elevated commodity prices and a weak rupee inflated the country’s import bill.

The gap between exports and imports widened to $31.02 billion in July, from $26.18 billion in June, B.V.R Subrahmanyam, India’s trade secretary, told reporters at a briefing in New Delhi Tuesday, citing preliminary data. The trade deficit in June was a record before the latest numbers were released.

The government also slightly raised the tax on domestically produced crude oil to 17,750 rupees per tonne from 17,000 rupees per tonne. Last month, India slashed windfall taxes, sparking a rally in the nation’s No. 1 fuel exporter Reliance Industries Ltd.

Imports jumped 43.59% in July from a year ago, while exports dropped 0.76%. Inbound shipments of petroleum products during the month stood at $21.13 billion, and gold imports came in at $2.37 billion. Coal imports stood at $5.17 billion while petroleum exports for last month stood at $5.4 billion, government data showed.

July’s data comes after the federal government raised import duty on gold last month to discourage buyers in the world’s second-largest consumer and rein in the yawning trade deficit. 

Growing concerns about the gap and an exodus of foreign capital from Indian markets had pushed the rupee to a record low of 80.06 per dollar last month. The local unit has since rebounded amid a broad pick up in appetite for riskier assets and currencies.