On April 3, the Union government increased the windfall tax on crude petroleum to Rs 6,800/tonne from Rs 4,900/tonne, effective from April 4. This tax is imposed in the form of Special Additional Excise Duty (SAED).
Earlier, on March 15, the government had raised the windfall tax on crude petroleum from Rs 4,600/tonne to Rs 4,900/tonne. The Special Additional Excise Duty (SAED) on the export of diesel, petrol, and Aviation Turbine Fuel remains at zero.
These tax rates are subject to review every fortnight based on the average oil prices in the previous two weeks.
The significant increase in windfall taxes on crude petroleum by the government comes amidst rising global oil prices. Oil prices have been on an upward trend due to concerns about potential disruptions in supply caused by escalating geopolitical tensions. However, some of these concerns were alleviated by an unexpected increase in US crude oil inventories.
Brent crude futures rose by 84 cents, or 0.9 percent, to $89.76 per barrel on April 3, while US West Texas Intermediate futures increased by 76 cents to $85.91 per barrel.
The windfall tax is triggered on domestic crude oil when global benchmark rates exceed $75 per barrel. Similarly, the levy applies to the export of diesel, ATF, and petrol if product margins surpass $20 per barrel. Product margins represent the difference between crude oil and finished petroleum products.
India first introduced the windfall tax on crude oil producers in July 2022 amid soaring crude oil prices. The levy was extended to exports of gasoline, diesel, and aviation fuel as private refiners sought to capitalize on strong refining margins by selling fuel overseas instead of domestically. Windfall taxes are imposed by governments when industries unexpectedly generate large profits.
The rising crude oil prices are a matter of concern for India, the world’s third-largest importer of crude oil, according to Pankaj Jain, India’s oil secretary. He expressed concerns about the “geopolitical premium” in crude prices, stating that any price increase would cause anxiety for a consuming nation like India.
