Mon Dec 02 10:22:43 UTC 2024: ## India Scraps Windfall Profit Tax on Domestic Crude Oil and Fuel Exports
**New Delhi, [Date of Publication]** – The Indian government has abolished the windfall profit tax on domestically produced crude oil and exported fuels, effective immediately. The decision, announced Monday by Minister of State for Finance Pankaj Chaudhary, follows a decline in international oil prices.
The tax, implemented in July 2022, levied a special additional excise duty (SAED) on crude oil production and exports of aviation turbine fuel (ATF), diesel, and petrol. A road and infrastructure cess (RIC) on petrol and diesel exports was also withdrawn. The government collected approximately ₹25,000 crore (US$3 billion) in the tax’s first year, with significantly lower revenue in subsequent periods.
The tax, initially imposed at rates ranging from ₹6 to ₹23,250 per tonne depending on the fuel and international oil prices, was adjusted bi-weekly. While the levy on petrol exports was removed early on, taxes on diesel and ATF exports were eliminated and reinstated several times before being finally scrapped.
The removal benefits major oil producers like ONGC and Oil India, and exporters such as Reliance Industries and Nayara Energy. The government justified the initial tax as a means to capitalize on energy companies’ profits during periods of high oil prices, but it faced criticism from the industry for impacting profitability and creating uncertainty. The Ministry of Petroleum and Natural Gas had reportedly advocated for its removal for some time.
The decision comes as the average price of India’s imported crude oil basket fell to US$73.02 per barrel in November, down from US$75.12 in October and significantly lower than the April high of US$90. The tax was based on a threshold of US$75 per barrel for domestic crude and on margins earned from fuel exports.
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