India reduces windfall tax on crude oil, maintains nil export duty

India reduced the windfall tax on domestically produced crude oil from Rs 7,000 to Rs 4,600 per tonne, effective August 1, due to a drop in crude prices. The export duty on petrol, diesel, and aviation turbine fuel remains nil. The windfall tax, introduced in July 2022, is revised fortnightly to manage private refiners’ tendency to export fuel for higher profits.

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The windfall rate on domestically produced petroleum crude has been reduced by India from Rs 7,000 per tonne to Rs 4,600 per tonne, owing to a softening in crude prices. (The export duty on petrol, diesel, and aviation turbine fuel will continue to be nil.) The Central Board of Indirect Taxes and Customs (CBIC) announced in a statement issued late Wednesday that the new rates will take effect on August 1.

In the previous revision on July 16, the windfall tax on domestically produced crude oil had been increased from Rs 6,000 per tonne to Rs 7,000 per tonne. (The tax is levied in the form of Special Additional Excise Duty (SAED).)

The windfall tax on crude oil producers was initially imposed by India in July 2022. This levy was also extended to exports of gasoline, diesel, and aviation fuel. The motivation behind these measures was that private refiners preferred selling fuel overseas to benefit from robust refining margins rather than supplying the domestic market. The government has been revising this tax fortnightly.