The Union government has reduced the windfall tax on domestically produced crude oil to Rs 2,100 per tonne, down from the previous Rs 4,600 per tonne. This decision comes as part of the government’s regular review of the tax.
Key Points:
- Windfall Tax Reduction: The tax on crude oil has been slashed by more than half, offering relief to producers.
- No Change for Diesel and ATF: The windfall tax on the export of diesel and aviation turbine fuel (ATF) remains at zero.
Background:
- Previous Tax Rate: On July 31, the government had already lowered the windfall tax on crude oil by 34.3% from Rs 7,000 per tonne to Rs 4,600 per tonne.
- Introduction of Windfall Tax: The Indian government introduced this tax in July 2022, initially targeting crude oil producers. It was later expanded to include gasoline, diesel, and ATF exports.
Purpose of the Tax:
The windfall tax was introduced to ensure that private refiners prioritize the domestic market supply over selling fuels abroad at higher global prices. The tax is reviewed every two weeks based on international crude and product prices.
Market Impact:
- Crude Oil Prices: The price of crude oil has been trading below $80 per barrel due to concerns over demand from China, the world’s largest oil consumer, and reduced tensions in the Middle East.
This reduction in windfall tax may offer some financial relief to crude oil producers in India, aligning with the current global economic conditions.
