The finance ministry is reportedly currently assessing the relevance of the windfall tax, according to a Reuters report citing sources from the federal government on Thursday. Introduced in July 2022, the windfall tax was a special levy on domestic crude oil production aimed at capturing revenue from windfall gains made by producers in response to rising global crude prices.
In addition to the crude oil levy, the government also imposed special taxes on diesel, petrol, and aviation turbine fuel exports.
By the end of August, the windfall tax on domestically produced crude oil was reduced to Rs 1,850 ($21.90) per tonne and was eventually scrapped entirely on September 18. The export taxes on diesel and aviation turbine fuel were also eliminated.
According to the source in the report, the federal finance ministry is reviewing windfall tax collections and analysing crude price trends before deciding whether to abolish the levy.
Tarun Kapoor, adviser to the Indian prime minister, stated last month that the finance ministry would assess the possibility of scrapping the windfall tax on domestic crude oil production. Officials noted that with the decline in global crude oil prices, there is little justification for continuing the tax. “Finance ministry will take a view ...I think petroleum ministry has already written to them,” Kapoor said at the time.
The windfall tax is typically imposed when global benchmark prices for domestic crude oil exceed $75 per barrel. This tax aims to support the domestic refining industry, ensuring it contributes to the country’s economic growth while stabilising fuel availability. It also helps manage domestic fuel prices, keeping them under control. The government seeks to strike a balance between fostering the country's economic growth and safeguarding the financial interests of energy sector stakeholders.