Government Increases Windfall Tax on Locally-Produced Crude Oil

Government Increases Windfall Tax on Locally-Produced Crude Oil

VoM News Desk | September 16, 2023 | 07:37 AM IST | Breaking News, Energy | Follow on Google News

Government Increases Windfall Tax on Locally-Produced Crude Oil. Image/Reuters

The Indian government has raised the windfall tax on the sale of domestically-produced crude oil from ₹6,700 to ₹10,000 per tonne, effective September 16, according to a recent notification. This move aims to capture a larger share of the profits generated by oil exploration and production companies during periods of high crude oil prices.

Reductions in Special Additional Excise Duty (SAED)

The notification also includes reductions in the Special Additional Excise Duty (SAED) on various petroleum products:

• SAED on aviation turbine fuel (ATF) has been reduced to ₹3.50 per litre from ₹4, effective September 16.
• SAED on diesel has been cut from ₹6 per litre to ₹5.50 per litre.

Impact on Export of Petrol

The SAED on the export of petrol will continue to be zero, as per the notification.

Background and Rationale

The windfall tax was first imposed on the sale of locally-produced crude oil on July 1, 2022, in response to significant profits earned by oil exploration and production companies due to rising crude oil prices, particularly after Russia’s invasion of Ukraine. Additionally, the additional levy on the export of petrol, diesel, and jet fuels was introduced to encourage private refiners to sell these products in the domestic market rather than primarily exporting them.

Global Crude Oil Market Dynamics

International crude oil prices have been on an upward trend, driven by factors such as Saudi Arabian and Russian oil output cuts, strong Chinese demand, and supply tightness. As of the latest data, oil prices have reached multi-month highs, with Brent futures briefly touching $94.63 per barrel, their highest level since November 2022. These price increases have contributed to India’s decision to adjust taxes on petroleum products to manage revenue and fiscal goals.

VoM News Desk

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