Centre increases windfall tax on crude oil output

The decision to hike the levies was taken after a fortnightly review of international oil prices on Saturday.

The government on Saturday raised the tax on windfall profits on locally produced crude oil by 37.5% to ₹11,000 per tonne and hiked the levy on diesel exports by 140% to ₹12 per litre, while reimposing it on exports of jet fuel at ₹3.50 per litre, as global oil prices surged this fortnight after the producers’ cartel – the Organisation of the Petroleum Exporting Countries and its allies – decided a steep cut in output.

This is the seventh fortnightly review of the windfall profit tax on petroleum products since it was imposed from July 1, 2022 (REUTERS)

The decision to hike the levies was taken after a fortnightly review of international oil prices on Saturday. The new rates will be applicable from Monday, according to a finance ministry notification. This is the seventh fortnightly review of the windfall profit tax on petroleum products since it was imposed from July 1, 2022.

The government had reduced the levies substantially after the previous round of fortnightly review that saw the tax on crude plunging from ₹10,500 per tonne to ₹8,000 from October 2, while it had dropped from ₹10 a litre to ₹5 a litre on exports of diesel because international fuel prices fell sharply below $90 a barrel.

After the previous review, the levy on jet fuel was brought down to zero from ₹5 per litre. Petrol exports that initially attracted ₹6 a litre windfall profit tax on July 1 did not attract the levy since the first review in mid-July because state-run oil marketers did not incur any revenue loss on the sale of the auto fuel in the domestic market.

The tax on domestic crude oil output would mainly affect energy firms such as Oil and Natural Gas Corporation, Oil India and Vedanta. Levy on exports of fuels will mainly impact private refiners such as Reliance Industries and Nayara Energy.