Wed Sep 18 04:29:03 UTC 2024: ## India Scraps Windfall Tax on Domestic Crude Oil, Boosting Upstream Companies

**New Delhi, September 18, 2024:** The Indian government has eliminated the windfall tax on domestically produced crude oil, effective immediately. This move comes after a period of rising oil prices, which led to the imposition of the tax last July.

The windfall tax, levied as a Special Additional Excise Duty (SAED), aimed to capture the benefits of high oil prices above $75 per barrel. The tax was revised bi-weekly based on average oil prices over the preceding two weeks.

This decision is expected to have a positive impact on upstream oil companies like ONGC and Oil India Ltd, which have faced reduced earnings due to the tax. The removal of the windfall tax will allow these companies to fully benefit from higher oil prices, potentially leading to increased profitability.

However, while the lower oil prices are generally favorable for oil marketing companies (OMCs), they face high margins on petrol and diesel. Analysts expect a price reduction in these fuels soon.

Kotak Institutional Equities has maintained a “SELL” rating on BPCL, HPCL, IOC, and Oil India, and a “REDUCE” rating on ONGC. YES Securities, on the other hand, favors HPCL, followed by BPCL and CPCL, noting that Indian refiners are benefiting from discounted crude from Russia and some Middle Eastern players.

This development marks a significant shift in India’s energy policy, potentially influencing future investment in the upstream oil sector.

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