India Reduces Windfall Tax on Domestic Crude Oil

India Reduces Windfall Tax on Domestic Crude Oil

On Wednesday, May 15, 2024, the Indian government announced a reduction in the windfall tax on domestically produced crude oil, lowering it from ₹8,400 to ₹5,700 per tonne, effective from May 16, 2024. An official statement states that the windfall tax, which is a Special Additional Excise Duty, has been kept at zero for the export of diesel, petrol, jet fuel, and aviation turbine fuel.

Along with other countries that levy a windfall tax on energy corporations’ abnormally high earnings, India was the first to do so on July 1, 2022. At first, gasoline and ATF were subject to export charges of ₹6 per litre ($12 per barrel), whereas diesel was subject to ₹13 per litre ($26 per barrel).

When international benchmark prices for crude oil exceed $75 per barrel, the domestic market is subject to the windfall tax. If the product cracks or margins for diesel, ATF, and petrol exports exceed $20 per barrel, the levy will be applied.

The government is trying to help local oil producers respond to the unpredictable global oil market by lowering the windfall tax. The bottom lines of energy corporations in India are likely to take a major hit as a result of this change.