Government Increases Windfall Tax on Petroleum Crude to ₹3,200 per tonne

The government of India has announced a significant hike in the windfall tax on petroleum crude, raising it to ₹3,200 per tonne from the previous rate of ₹1,700 per tonne, with effect from February 3. This move comes as part of the government’s ongoing efforts to regulate the petroleum industry and ensure fair pricing.

However, it is important to note that the windfall tax on diesel and aviation turbine fuel (ATF) remains unchanged at zero. This decision highlights the government’s tailored approach to taxing different petroleum products based on market conditions and industry dynamics.

The implementation of the windfall tax on crude oil producers in India dates back to July 2022, in response to private refiners’ shift towards exporting gasoline, diesel, and aviation fuel to take advantage of favorable refining margins. The government has been revising this tax every two weeks to align with changing market dynamics.

The windfall tax undergoes fortnightly revisions based on fluctuations in international crude and product prices, with the current crude oil prices hovering around $82 per barrel. The tax is imposed when an industry experiences unexpectedly high profits, typically due to an unforeseen event or market trend.

Overall, the windfall tax serves as a mechanism to ensure fair pricing in the petroleum industry and prevent any undue advantage for oil producers. With key players like Reliance Industries Ltd and Nayara Energy dominating the fuel export market in India, the government’s move to adjust the windfall tax aims to maintain a balance between industry profitability and consumer affordability.

As the government continues to monitor market trends and international prices, further revisions to the windfall tax may be expected in the future. Stay tuned for more updates on this developing story.

(With inputs from Reuters)