Govt Considering Removing Windfall Tax On Crude Oil, Says PMO Advisor

The official said that the tax on the commodity held no relevance anymore as global oil prices have softened sharply recently in comparison to 2022

The Indian government is looking into removing windfall tax on local crude oil output, a senior official said on Wednesday. Tarun Kapoor, advisor to Prime Minister Narendra Modi’s office, on October 23 said that the Union Finance Ministry will consider cutting down the windfall tax completely on the domestic crude oil produce.

The official said that the tax on the commodity held no relevance anymore as global oil prices have softened sharply recently in comparison to 2022, reported Moneycontrol. The windfall tax on crude oil output was initially imposed back in 2022.

“Finance ministry will take a view ...I think petroleum ministry has already written to them,” Kapoor said addressing the media on the sidelines of an event. 

The windfall tax was introduced in order to capitalise on the private refiners’ preference to sell fuel abroad to increase their refining margins. This tax is revised every two weeks and is decided taking into account the global crude and product prices.

Windfall taxes are typically levied when an industry sees exceptionally high profits, owing to unexpected factors mostly. These taxes help limit the profits of the oil-producing companies specifically when crude prices hit the roof, due to geopolitical events such as the Russian invasion of Ukraine.

Generally, the windfall tax is imposed when global benchmark prices for domestic crude oil surpass $75 per barrel. Windfall taxes help manage the domestic refining industry so that it contributes to the country’s economic growth and stabilise fuel availability. It also helps control domestic prices and keep them in check. The government tries to keep a balance between economic growth of the country and the financial wellbeing of players in the energy sector.