Centre Raises Windfall Tax On Domestic Crude, Cuts Export Duty On Diesel, Jet Fuel

In its latest fortnightly review of Special Additional Tax Duty (SAED) on crude petroleum was raised from Rs 10,000 per tonne to Rs 12,100 per tonne with effect from September 30.

The government on Friday hiked the windfall tax of crude petroleum to Rs 12,100 per tonne while cutting down the levy on the export of diesel and jet fuel. In its latest fortnightly review of Special Additional Tax Duty (SAED), better known as windfall gain tax, on crude petroleum was raised from Rs 10,000 per tonne to Rs 12,100 per tonne with effect from September 30.

Additionally, the SAED or export duty on diesel was slashed from the current Rs 5.50 per litre to Rs 5 per litre. The duty on jet fuel, also known as Aviation Turbine Fuel (ATF), was also decreased from the current Rs 3.5 per litre to Rs 2.5 per litre, and it will take effect starting Saturday. The SAED on petrol was kept unchanged at nil.

The Central government first imposed windfall taxes on domestically produced crude oil sales starting from July 1, 2022. This decision was prompted by significant profits earned by oil production companies, driven by multi-year high crude oil prices following Russia's invasion of Ukraine.

Additionally, an extra levy was introduced on the export of petrol, diesel, and jet fuels, mainly because private refiners were reportedly prioritising foreign markets due to more favorable international prices rather than the domestic market.

The latest hike in windfall tax on crude oil coincides with the backdrop of crude prices surpassing the $90 per barrel threshold. The November contract of Brent crude on the Intercontinental Exchange is presently trading at $95.43 per barrel, marking a slight 0.05 per cent increase from its previous closing price. Meanwhile, the November contract of West Texas Intermediate (WTI) is trading at $91.50 per barrel, indicating a modest 0.23 per cent decrease from its previous close.

These price trends are driven by supply concerns arising from OPEC+ implementing supply cuts and announcements of voluntary cuts by Saudi Arabia and Russia. Furthermore, the anticipated increase in demand in the upcoming winter season due to heating requirements is expected to contribute to sustained high prices.