Govt slashes windfall tax on crude oil by over ₹1,300 per tonne

The Indian government on Thursday reduced the windfall gains tax on crude oil by ₹1,300 per tonne to ₹5,000 from from ₹6,300 a tonne. The tax rates are reviewed every two weeks taking into consideration the movements of international crude and product prices. The central government had lowered oil prices from ₹9,800 per tonne to ₹6,300 per tonne two weeks ago.

As per an official notification on October 31, the Special Additional Excise Duty (SAED) on domestically produced crude oil was raised from ₹9,050 per tonne to ₹9,800 per tonne, effective from November 1. Furthermore, the SAED on diesel exports was decreased from ₹4 to ₹2 per litre.

The tax was first imposed by the Indian government in July 2022, with export duties of ₹6 per litre ($12 per barrel) on petrol and ATF and ₹13 per litre ($26 per barrel) on diesel.

A windfall tax is levied by the government on domestic crude oil if rates of the global benchmark rises above $75 per barrel. Export of diesel, ATF and petrol attract the tax if product cracks (or margins) rise above $20 per barrel.

Earlier in August, the government hiked windfall tax on diesel to ₹1 per litre from nil. In July of 2022, the centre introduced the windfall tax on crude oil, diesel and aviation fuel exports. This decision stemmed from private refiners choosing international markets over domestic sales at lower-than-market rates to capitalise on elevated refining margins. The tax rates are adjusted every two weeks in accordance with the current international rates.

The government first imposed the windfall tax on crude oil, diesel, and aviation fuel exports in July 2022, after private refiners preferred selling at lower-than-market rates in the country to profit from high refining margins. The tax rates are revised every two weeks based on the current international rates.

State-owned oil companies IOCL, BPCL and HPCL together control around 90% of the fuel retailing network in India.