Government cuts windfall tax on crude petroleum to ₹5,000/tonne, jet fuel price also down | Mint
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Business News/ Economy / Government cuts windfall tax on crude petroleum to 5,000/tonne, jet fuel price also down
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Government cuts windfall tax on crude petroleum to ₹5,000/tonne, jet fuel price also down

Windfall tax on crude petroleum has been reduced from ₹6,300/tonne to ₹5,000/tonne, while the levy on jet fuel has been adjusted to ₹1.06 lakh per kilo litre

Due to a decline in international oil prices since the last adjustment, there has been a necessity for a reduction. (AFP)Premium
Due to a decline in international oil prices since the last adjustment, there has been a necessity for a reduction. (AFP)

The government announced a decrease in the windfall tax on crude petroleum and jet fuel by 1,300 per tonne, effective from December 1, as per a Moneycontrol report.

The tax on crude petroleum has been reduced from 6,300/tonne to 5,000/tonne, while the levy on jet fuel has been adjusted to 1.06 lakh per kilo litre (kL) from the previous 1.11 lakh/kL, it added

During the previous review on November 16, the government slashed the windfall tax on crude petroleum by 3,500 from 9,800 per tonne to 6,300 per tonne. This was in line with the downward trend in global oil prices.

Before this, on November 1, the government raised the tax on crude oil from 9,050 per tonne to 9,800 per tonne. Subsequently, the duty on diesel exports was reduced by half to 2/litre, while the levy on jet fuel was eliminated, bringing it down from Re 1/litre to nil.

Due to a decline in international oil prices since the last adjustment, there has been a necessity for a reduction.

What is windfall tax?

The windfall tax undergoes fortnightly revisions, contingent upon the fluctuations in international crude and product prices. Presently, crude oil prices are trading at approximately $82 per barrel.

India initially introduced the windfall tax in July 2022 in response to the escalating price of crude oil. This tax is imposed by governments when an industry unexpectedly generates substantial profits, typically attributed to an unprecedented event.

A windfall tax is imposed on domestically produced crude oil when the rates of the global benchmark exceed $75 per barrel. For the export of diesel, aviation turbine fuel (ATF), and petrol, the levy is applicable when the product cracks, or margins, surpass $20 per barrel.

Product cracks or margins represent the difference between the cost of crude oil (raw material) and the value of the finished petroleum products.

The levy on domestic crude oil dropped to nil in the first half of April as international crude oil prices fell but was back in the second half in step with a rise in rates.

The tax on diesel was eliminated in April but was reintroduced in August. Similarly, the duty on ATF was reduced to nil in March but reinstated in the second half of August. However, the export tax on petrol was abolished in the initial review.

The process involves refining and converting crude oil extracted from the ground or beneath the seabed into various fuels such as petrol, diesel, and ATF.

Key players in fuel export in India include Reliance Industries Ltd, operating the world's largest single-location oil refinery complex in Jamnagar, Gujarat, and Nayara Energy, which is backed by Rosneft.

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Published: 01 Dec 2023, 10:00 AM IST
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