New Delhi – In a significant move, the Indian government has raised the windfall tax on domestically produced crude oil to ₹10,000 per tonne, effective from Saturday, 16 September. This marks a substantial increase from the previous rate of ₹6,700 per tonne that was in place for the past two weeks.
The Ministry of Finance, in a notification, also announced a reduction in the special additional excise duty (SAED) on the export of diesel to ₹5.50 per litre, down from ₹6 per litre. Similarly, the duty on jet fuel will now be ₹3.5 per litre, reduced from ₹4 per litre. Notably, the additional duty on the export of petrol remains unchanged at zero.
The imposition of windfall taxes on the sale of domestically produced crude oil was initiated by the government on July 1, 2022. This decision came as oil exploration and production companies reaped substantial profits amid the multi-year high crude oil prices following Russia’s invasion of Ukraine. Additionally, the increased levy on the export of petrol, diesel, and jet fuels was introduced to encourage private refiners to sell more in the domestic market.
This increase in the windfall tax coincides with crude oil prices surpassing $90 per barrel, with Brent crude currently hovering around $93.7 per barrel. The price surge is primarily driven by supply concerns, including OPEC+ supply cuts and voluntary reductions announced by Saudi Arabia and Russia. Anticipated high demand due to winter heating requirements is expected to maintain elevated prices.
Experts have also noted that output cuts may lead to further declines in oil inventories throughout 2023, potentially pushing prices even higher. However, economic headwinds are projected to limit global demand growth in 2024, according to the International Energy Agency.
