The government on Thursday reduced the windfall tax on exports of domestically produced crude oil and diesel due to the decline in the price of oil globally. The windfall tax on locally produced crude oil has been reduced by Rs 1,700 per tonne from Rs 4,900 per tonne, according to a notice from the finance ministry. While the windfall tax on high-speed diesel for exports has been decreased from Rs 8 per litre to Rs 5, the special additional excise duty on gasoline remains unchanged at “Nil.” This includes the 1.5 rupees per litre road infrastructure cess. ATF fuel levy has been reduced to Rs 1.5 per litre. The order said that modifications to the windfall tax would take effect on December 17, 2022.
The most recent modification resulted in a 65% reduction in the tax on oil produced in domestic fields. The windfall tax, which is imposed as a special supplementary excise duty and is updated every two weeks by the central government, is designed to absorb the enormous profits made by domestic crude oil producers as a result of high global crude oil prices. Depending on the price of crude and the refining spread, the levies’ rates fluctuate. Crude oil prices have decreased from $108 per barrel in March of this year to about $82 per barrel today.
On Thursday, oil prices fell by roughly 2% as traders fretted about the future of fuel demand as a result of a stronger currency and additional interest rate increases by international central banks. Brent futures dropped 1.8% to close at $81.21 per barrel after three straight days of gains, while U.S.West Texas Intermediate (WTI) crude dropped 1.5% to settle at $76.11 per barrel. On July 1, the Indian government introduced windfall profit taxes, joining an increasing number of countries that tax energy companies’ higher-than-average profits.
At the time, diesel had a litre export duty of Rs 13 and petrol and aviation turbine fuel had a litre export duty of Rs 6. On domestic crude output, a windfall profit tax of Rs 23,250 per tonne was also imposed. While the tax on windfall profits is determined by deducting any price that producers receive above a certain level, the charge on fuel exports is determined by the cracks or margins that refiners make on international shipments. These margins essentially reflect the discrepancy between the realised international oil price and the pricing. The government’s revenue includes the Windfall Gain Tax.