Government raises windfall tax on crude oil to ₹12,100 per tonne

The union finance ministry on Friday raised the windfall tax on locally produced crude oil to ₹12,100 per tonne.

For the past two weeks, it was at ₹10,000 per tonne.

Further, in the notification, the ministry said that the levy on sale of diesel has been decreased from ₹5.5 per litre to ₹5 per litre and from ₹3.5 per litre to ₹2.5 per litre on ATF. The revised levies would come into effect on 30 September.

Centre first imposed the windfall taxes on the sale of locally produced crude oil with effect from July 1, 2022 as oil exploration and producing companies made heavy profits amid multi-year high crude oil prices post Russia’s invasion of Ukraine. Further, the additional levy on the export of petrol, diesel and jet fuels came in as private refiners were largely selling abroad amid better international prices, instead of the domestic market.

The increase in windfall tax on crude comes at a time when crude prices are well above the $90 per barrel mark. The November contract of Brent on the Intercontinental Exchange is currently trading at $95.43 per barrel, higher by 0.05% from its previous close. The November contract of West Texas Intermediate (WTI) was trading at $91.50 per barrel, lower by 0.23% from its previous close.

The prices are rising amid supply concerns as OPEC+ has resorted to supply cuts and Saudi Arabia and Russia have announced voluntary cuts. Further anticipated demand ahead of the upcoming winters due to heating requirements may also keep the price elevated, experts said.

The International Energy Agency had last month said that the output cuts may erode oil inventories for the rest of 2023, potentially driving prices even higher, before economic headwinds limit global demand growth in 2024.

Saumil Gandhi, senior analyst for commodities at HDFC Securities said: “The global market is still expected to remain tight due to Saudi Arabia’s and Russia’s production cutbacks; therefore, the outlook is still positive. NYMEX WTI crude oil has rallied almost 30% since the end of June and is approaching the biggest quarterly gain since April 2022.”