The Central Government of India Slashed Windfall Tax on Crude Oil
On November 16, the Central government of India announced a reduction in the windfall tax on crude oil, bringing it down from Rs 9,800 per tonne to Rs 6,300 per tonne. Additionally, the windfall tax on diesel was decreased from Rs 2 per litre to Rs 1 per litre.
Previously, on October 31, the tax on domestically produced crude oil was hiked to Rs 9,800 per tonne, up from Rs 9,050 per tonne, as per an official notification which came into effect on November 1. The Special Additional Excise Duty (SAED) on diesel exports saw a reduction to Rs 2 per litre from the earlier Rs 4 per litre.
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The concept of windfall profit taxes was introduced in India on July 1, 2022, placing India amongst the list of countries that impose such taxes on the extraordinary profits of energy companies. Initially, the duties were set at Rs 6 per litre (equivalent to USD 12 per barrel) for petrol and aviation turbine fuel (ATF), and Rs 13 per litre (USD 26 per barrel) for diesel.
These tax rates are subject to a biweekly review, which is based on the average prices of oil in the international market over the preceding two weeks.
The imposition of the windfall tax applies to domestic crude oil when the prices of the global benchmark exceed USD 75 per barrel. Additionally, exports of diesel, ATF, and petrol are subject to this levy if their product cracks, which refer to profit margins, are above USD 20 per barrel.
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According to the article by Procurement Resource, India's government reduced the windfall tax on crude oil to Rs 6,300 per tonne and diesel to Rs 1 per litre on November 16. This adjustment follows an increase implemented on November 1. Windfall taxes, introduced on July 1 last year, target extraordinary energy company profits and are reviewed biweekly against international oil prices. The tax triggers for domestic crude exceed USD 75 per barrel, and for diesel, ATF, and petrol exports when margins surpass USD 20 per barrel.
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