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The government has halved the windfall tax on the export of diesel and scrapped the levy on jet fuel (ATF) shipments but raised the tax on domestically produced crude oil to Rs 17,750 per tonne from Rs 17,000 in a move that will hit a move that will hit producers like ONGC and Vedanta Ltd.

The tax on the export of diesel was cut to Rs 5 per litre from Rs 11, according to an official notification issued on Tuesday evening. Export of petrol will continue to attract nil tax.

The cut in taxes – the second in as many weeks – came as India’s trade gap swelled to a record.

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 USD 31.02 billion in July from USD 26.18 billion in June. This, as a result of exports falling and elevated commodity prices together with a weak rupee, is inflating the import bill.

Imports jumped 43.59 per cent in July from the year-ago month, while exports dropped 0.76 per cent.

India first imposed windfall taxes on July 1, joining a growing number of nations that taxes supernormal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.

On July 1, export duties of Rs 6 per litre (USD 12 per barrel) were levied on petrol and ATF and a Rs 13 a litre tax on the export of diesel (USD 26 a barrel). A Rs 23,250 per tonne windfall tax on domestic crude production (USD 40 per barrel) was also levied.

Thereafter, in the first fortnightly review on July 20, the Rs 6 a litre export duty on petrol was scrapped, and the tax on the export of diesel and jet fuel (ATF) was cut by Rs 2 per litre each to Rs 11 and Rs 4, respectively. The tax on domestically produced crude was also cut to Rs 17,000 per tonne.

Now, the export tax on diesel and ATF has been cut following a drop in refinery cracks or margins. But the levy on domestically produced crude oil has been raised in line with a marginal increase in international crude prices.