India Raises Windfall Tax on Crude Oil as Global Prices Soar

India Raises Windfall Tax on Crude Oil as Global Prices Soar
Windfall Tax on Crude Oil as Global Prices Soar
India Raises Windfall Tax on Crude Oil as Global Prices Soar
Windfall Tax on Crude Oil as Global Prices Soar

India Raises Windfall Tax on Crude Oil as Global Prices Soar

India Raises Windfall Tax on Crude Oil as Global Prices Soar

The Indian finance ministry has increased the windfall tax on locally produced crude oil to ₹12,100 per tonne, up from ₹10,000 per tonne over the past two weeks. The ministry also reduced the levy on the sale of diesel from ₹5.5 per litre to ₹5 per litre and on aviation turbine fuel (ATF) from ₹3.5 per litre to ₹2.5 per litre. These revised taxes took effect on September 30, 2023.

The windfall tax was initially imposed on the sale of domestically produced crude oil on July 1, 2022, as oil exploration and production companies enjoyed significant profits amid high crude oil prices triggered by Russia’s invasion of Ukraine. Additionally, a levy was placed on the export of petrol, diesel, and jet fuels as private refiners primarily sold these products overseas at better international prices.

The increase in the windfall tax on crude oil comes at a time when global crude prices remain above $90 per barrel. OPEC+ supply cuts, voluntary cuts by Saudi Arabia and Russia, and anticipated winter heating requirements are contributing to elevated oil prices.

The International Energy Agency has warned that output cuts may continue to deplete oil inventories throughout 2023, potentially pushing prices even higher, although economic challenges could limit global demand growth in 2024.

Saumil Gandhi, a senior commodities analyst at HDFC Securities, noted that the global oil market is expected to remain tight due to production cutbacks by Saudi Arabia and Russia, suggesting a positive outlook for oil prices.

This tax adjustment reflects India’s efforts to manage the impact of surging global oil prices on its economy while balancing its domestic fuel pricing dynamics.

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