Govt Cuts Windfall Tax On Crude Oil To Rs 3,250 Per Tonne

Previously, on June 1, the government implemented a reduction in the windfall tax rate applied to petroleum crude, lowering it from Rs 5,700 per metric tonne to Rs 5,200 per metric tonne

The government has reduced the windfall tax on petroleum crude from Rs 5,200 to Rs 3,250 ($38.90) per metric tonne, effective June 15, according to a notification issued on Friday. The tax rates for diesel and aviation turbine fuel tax rates remain unchanged at zero, as updated every fortnight.

Previously, on June 1, the government implemented a reduction in the windfall tax rate applied to petroleum crude, lowering it from Rs 5,700 per metric tonne to Rs 5,200 per metric tonne. This adjustment reflects the government's ongoing efforts to manage and stabilise fiscal policies related to the petroleum sector amid changing economic conditions.

The windfall tax policy, extended to encompass gasoline, diesel, and aviation turbine fuel (ATF) exports, seeks to dissuade private refiners from favouring exports over meeting domestic market demands. This policy involves the government adjusting the windfall tax rate every two weeks. The recent hike in the windfall tax on petroleum crude underscores the government's dedication to maintaining a stable supply of fuel within the country, aiming to curb excessive exports by private refiners.

Introduction Of Windfall Tax:

In July 2022, India introduced a taxation regime targeting crude oil production and the export of gasoline, diesel, and aviation fuel. This initiative aimed to control the significant profits garnered by oil production companies during a period of elevated crude oil prices. These price increases were primarily influenced by geopolitical events, including Russia's invasion of Ukraine.

The measure sought to ensure that India's refining sector contributes effectively to the nation's economic objectives while maintaining stability in fuel availability and pricing within the country.

Usually, the windfall tax comes into effect when global benchmark rates for domestic crude oil exceed $75 per barrel. Similarly, for exports of diesel, aviation turbine fuel (ATF), and petrol, the tax applies when product margins surpass $20 per barrel.