Centre cuts windfall tax on crude oil

The finance ministry has reduced to windfall tax on the sale of locally-produced crude oil to Rs 6,700 per tonne.

However, the ministry has raised the Special Additional Excise Duty (SAED) on the export of diesel to Rs 6 per litre from Rs 5.50 a litre. The levy on the export of aviation turbine fuel has been raised to  Rs 4 per litre from Rs 2, showed a notification released late on Saturday evening. The SAED on petrol continues to remain at zero.

Centre first imposed the windfall taxes on the sale of locally produced crude oil with effect from July 1, 2022 as oil exploration and producing companies made heavy profits amid multi-year high crude oil prices post Russia’s invasion of Ukraine. Further, the additional levy on the export of petrol, diesel and jet fuels came in as private refiners were largely selling abroad amid better international prices, instead of the domestic market.

International crude oil prices have, however, declined significantly since last year. In the past couple of months, crude has again traded higher and remained elevated. Currently, Brent is over $88 per barrel.

The prices are rising amid supply concerns as OPEC+ has resorted to supply cuts and Saudi Arabia and Russia have announced voluntary cuts. Further anticipated demand ahead of the upcoming winters due to heating requirements may also keep the price elevated, experts said. In days ahead crude prices are seen in the range of $80-90 per barrel.

The International Energy Agency had last month said that the output cuts may erode oil inventories for the rest of 2023, potentially driving prices even higher, before economic headwinds limit global demand growth in 2024.