Indian Govt imposes windfall tax on domestic crude

The union government imposed a windfall tax on crude oil produced locally. The government also levied additional excise duty on exports of petrol, diesel and aviation turbine fuel (ATF) to temper domestic fuel retail prices and ensure availability.

While a cess of $295.05 (₹23,250) per tonne has been imposed on crude oil, a special excise duty of $0.076 (₹6), 0.16 (₹13), and $0.076 (₹6 ) per litre has been imposed on the export of petrol, diesel, and ATF respectively. Small crude oil producers with annual production of less than two million barrels have been exempted from this windfall tax.

This move to impose windfall tax comes in the backdrop of a sharp rally in global crude oil prices with Indian upstream explorers including Oil and Natural Gas Corporation (ONGC), Reliance Industries Ltd (RIL), Oil India Ltd and Vedanta’s Cairn Oil & Gas among others selling crude to domestic refineries at par with international prices.

Also, with exports becoming highly remunerative, some refiners are drying out their fuel retail pumps in the domestic market to export petrol and diesel to take advantage of high international crude oil prices.

India’s oil import dependency over the years has risen, widening the trade deficit and putting further pressure on the domestic currency, which has slumped to its lowest against the dollar.