The government, in a notification released on Wednesday, announced its decision to increase the windfall tax on petroleum crude for the fifth time since February, setting it at Rs 6,800 ($81.43) per metric tonne, up from Rs 4,900. According to a report by Reuters, this revision, effective from April 4, underscores the government's efforts to manage profits garnered by oil production companies amidst fluctuating global oil prices.
Windfall Tax Review
Notably, the windfall tax, which is reviewed fortnightly, remains unchanged for diesel and aviation turbine fuel (ATF), maintaining a zero rate. This latest adjustment follows the government's previous increase of the windfall tax on petroleum crude to Rs 4,900 per metric tonne from Rs 4,600 on March 15.
The inception of the windfall tax traces back to July 2022 when India initially imposed it on crude oil producers. Subsequently, the levy was extended to cover exports of gasoline, diesel, and aviation fuel. This regulatory measure aimed to curb private refiners' inclination to prioritise international sales over domestic distribution, driven by more lucrative refining margins in overseas markets.
Introduction of Windfall Tax
The decision to introduce the windfall tax in 2022 stemmed from the substantial profits accumulated by oil production companies amid heightened crude oil prices, spurred by geopolitical events such as Russia's invasion of Ukraine.
Typically, the windfall tax is activated when global benchmark rates surpass $75 per barrel for domestic crude oil. For exports of diesel, ATF, and petrol, the levy kicks in if product margins exceed $20 per barrel.
The tax is administered in the form of Special Additional Excise Duty (SAED), with the SAED for diesel, petrol, and ATF exports remaining at zero, as indicated by the official notification.
On Wednesday, Brent crude, the global oil benchmark, saw a rise of 0.37 per cent, reaching $88.68 per barrel.