India reimposes tax on domestic crude production

The government has reimposed a tax of 1,600 rupees/t ($2.66/bl) on domestic crude output from 15 July, after slashing it to zero on 16 May. The federal government revises the windfall tax rates every two weeks but had kept the levy at zero over the last two months.

India has reimposed the windfall tax even as it seeks to raise domestic crude production to reduce its reliance on imports. The tax could have been raised as global crude prices have moved up on the back of supply cuts by Russia and Saudi Arabia.

At 04:00 GMT, the Ice front-month September Brent contract was at $79.19/bl, down by 68¢/bl from its settlement on 14 July when the contract ended $1.49/bl lower. But the Ice Brent front-month settlement price has risen from $74.91/bl on 16 May when the crude tax was removed. The Indian crude basket was at $81.44/bl on 14 July compared with an average of $74.98/bl in June and $74.93/bl in May, oil ministry data show.

The government aims to produce 25pc of India’s total crude demand domestically by 2030. But imports comprised 88pc of all consumption in May, stable from April but up from 86.5pc in May 2022, oil ministry data show.

India’s crude and condensate production during the April 2022-March 2023 fiscal year fell compared with a year earlier. India produced 29.2mn t (586,000 b/d) of crude and condensate during 2022-23, down from 596,000 b/d in 2021-22, according to oil ministry data. The country produced 591,000 b/d of crude and condensate in May, up by 2pc from April but down by 2pc from a year earlier.

Meanwhile, India kept export taxes on diesel and jet fuel at zero in its latest review.

India scrapped diesel export duties on 19 April for the first time since the introduction of the tax regime in July 2022, continuing with this policy ever since. Export duties on jet fuel were removed from 4 March and remained at zero in the latest review.