The Centre on Thursday announced an increase in the windfall tax on petroleum crude, effective from February 16. According to a government notification, the tax rate will rise to Rs 3,300 ($39.76) per metric ton from the previous Rs 3,200. Additionally, the windfall tax on diesel, which had previously been set at zero, will now be levied at Rs 1.50 per litre.
This decision marks a continuation of the government's efforts to regulate the petroleum sector's profitability. The windfall tax on aviation turbine fuel (ATF) and petrol will remain at zero, as per the notification. The recent move follows a previous increase in the windfall tax on petroleum crude announced on February 3. At that time, the tax was raised to Rs 3,200 per tonne from Rs 1,700 per tonne, while the tax on diesel, ATF, and petrol was maintained at zero.
India initially imposed a windfall tax on crude oil producers in July 2022, and later extended the levy to exports of gasoline, diesel, and aviation fuel. This decision was made in response to private refiners' attempts to capitalise on higher refining margins in overseas markets rather than selling domestically. The windfall tax is revised fortnightly by the government.
The imposition of the windfall tax on crude oil producers in July 2022 was a response to significant profits earned by oil production companies, driven by high crude oil prices following geopolitical events such as Russia's invasion of Ukraine.
Typically, a windfall tax is levied on domestic crude oil when global benchmark rates exceed $75 per barrel. For exports of diesel, ATF, and petrol, the levy is applied if product margins rise above $20 per barrel.
The tax is imposed in the form of Special Additional Excise Duty (SAED), with the SAED on export of diesel, petrol, and jet fuel or ATF remaining at nil, according to the official notification.