Govt Scraps Windfall Tax On Crude, ATF, Petrol, And Diesel

The windfall tax, introduced in July 2022, was designed to capture extraordinary gains made by producers amid surging global crude oil prices

The decision comes as global crude oil prices have stabilised in the $70-$75 per barrel range, a significant drop from levels seen during the windfall tax’s inception.

Source : Pixabay

The Ministry of Finance announced on December 2 (Monday) the withdrawal of the windfall tax on aviation turbine fuel (ATF), crude oil, diesel, and petrol products. According to the Finance Ministry, the withdrawal was formalised through Notifications 29/2024 and 30/2024, issued with immediate effect. The move eliminates the Special Additional Excise Duty (SAED) on crude oil production and the export of ATF, as well as the Road and Infrastructure Cess (RIC) on the export of petrol and diesel. These changes have been notified to Parliament.

The windfall tax, introduced in July 2022, was designed to capture extraordinary gains made by producers amid surging global crude oil prices. It targeted domestic crude oil production and included levies on exports of diesel, petrol, and ATF.

The levy, implemented as SAED, was adjusted fortnightly based on the average price of crude oil over two weeks. The last revision on August 31 set the tax on crude oil at Rs 1,850 per tonne. By September 18, the SAED on the export of diesel, petrol, and ATF had been set to nil.

The decision comes as global crude oil prices have stabilised in the $70-$75 per barrel range, a significant drop from levels seen during the windfall tax’s inception. Factors influencing this trend include weaker demand from China, easing geopolitical tensions in the Middle East, and concerns of oversupply in global oil markets.

Typically, the windfall tax is imposed when global benchmark crude prices exceed $75 per barrel, ensuring the domestic refining sector contributes to economic growth while stabilising domestic fuel prices.

The withdrawal is expected to benefit energy sector stakeholders, particularly crude producers and exporters of refined petroleum products. The government aims to balance domestic economic growth with the financial health of the energy sector while maintaining fuel price stability for consumers.

This policy shift underscores the government's adaptability to changing global economic and market conditions, focusing on supporting both the energy sector and the broader economy.