India has eliminated the windfall tax on crude oil production and cut the levy on diesel by 50%.

In July, India enforced a windfall tax on crude oil producers, coupled with a declaration of imposing a duty on the export of gasoline, diesel, and aviation fuel. The purpose of imposing an export tax on these petroleum products was to prevent the escalation of prices in the domestic market.

As per a recent notification issued by the Indian government, the windfall tax applicable on crude oil production has been revoked with effect from April 4, 2023. Previously, the windfall tax rate on crude oil was Rs 3500 ($42.56) per tonne. The windfall tax rate on diesel has also been reduced from Rs 1 to Rs 0.50 per liter. Notably, there is no windfall tax on petroleum and ATF.

In July, India had imposed a windfall tax on crude oil producers and also announced the imposition of a levy on the export of gasoline, diesel, and aviation fuel. Private refineries in the country were trying to benefit from the surge in petroleum product prices by selling them in the global market rather than in the domestic market. To prevent the rise in domestic market prices, the government decided to impose export taxes on gasoline, diesel, and aviation fuel.

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India implemented the windfall tax on July 1 of the previous year.

The tax on petroleum products in India is reviewed every two weeks based on the average price of the previous two weeks. Notably, major private companies exporting fuel from the country are Reliance Industries, which runs a refinery complex in Jamnagar, Gujarat, and Nayara Energy, a company invested in by Rosneft. India introduced the windfall tax on July 1 of the previous year.

What is windfall tax?

Governments impose windfall tax on industries when they make unexpectedly large profits. In July of last year, the tax was imposed on crude oil producers in India as their profits surged due to high energy prices. Since then, the windfall tax applicable to crude oil has decreased significantly. On July 1, 2022, it was set at Rs 23250 per ton, but by March 21, 2023, it had fallen to Rs 3500 per tonne. As the price of Brent crude oil has fallen, the windfall tax has also decreased.