The Indian government Monday announced the scrapping of the windfall tax on crude products, aviation turbine fuel (ATF), petrol and diesel exports. The change, which came into effect immediately, is seen as a big relief for oil producers and refiners in India.
A report by CNBC TV18 quoted sources as saying that the top government departments, including the Prime Minister’s office, took a detailed review of the levy (imposed in July 2022) with the Revenue Department and the Petroleum Ministry, after which it was decided to “discontinue with the tax”.
On July 1, 2022, a special levy was introduced on domestic crude oil production after a rise in global crude prices. It was imposed to capture excess revenue generated from the unexpected gains by producers.
The sources to CNBC TV18 said that some of the reasons behind the decision of abolishing the tax include the fact that the late levy was not yielding much revenue.
“The industry, since its existence, was unhappy with the tax. The levy was not making the industry enhance production levels, thus the PMO decided to discontinue the tax,” they said.
“Of late, average crude prices had become comfortable because of which most of the segments of the tax, be it the levy on ATF, petrol, or diesel, were continuing as a nil tax, thus the government did not want to continue with a tax which was not garnering much revenue,” they further said.
After it was introduced in July 2022, the windfall tax was revised every 15 days based on international crude oil prices.
Since its implementation, the tax has been a subject of controversy. In the beginning, it sought to balance government revenue amid fluctuating oil prices, industries soon started to argue that it was negatively impacting profitability and even disincentivised production.
In recent months, the tax became less effective as global crude oil prices witnessed a decline, thereby reducing the revenue generated.
With inputs from agencies.
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India scraps windfall tax on petrol-diesel exports, ATF 2 years after it was imposed
