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Govt increases windfall tax on crude petroleum to ₹3,200/tonne
The windfall tax on petroleum crude has been increased to ₹3,200 per tonne from ₹1,700 per tonne, effective February 3.
The government announced a hike in the windfall tax on petroleum crude, adjusting it to ₹3,200 per tonne from the previous rate of ₹1,700 per tonne, effective February 3.
However, the windfall tax on diesel and aviation turbine fuel (ATF) also known as jet fuel remains unchanged at zero.
On January 16, the government reduced the windfall tax on petroleum crude to ₹1,700/tonne from ₹2,300/tonne. Further back on January 2, the government lifted the windfall tax on petroleum crude oil to ₹2,300/tonne from ₹1,300/tonne.
Since July 2022, India has implemented a windfall tax on crude oil producers. This move was initiated in response to private refiners' interest in exporting gasoline, diesel, and aviation fuel to capitalise on favourable refining margins rather than selling domestically. The government revises this tax every two weeks.
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.
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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.
(With inputs from Reuters)
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First Published:3 Feb 2024, 10:56 AM IST
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