Budget 2023: No word on reduction of cess on crude, removal of windfall tax

The cess reduction is expected to boost the revenue of crude oil exploration and production companies like Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL).

In Budget 2016-17, the government had revised the way oil cess was charged by moving from a specific charge of Rs 4,500 per tonne of crude to an ad valorem rate of 20 per cent. The decision was meant to reduce the high cess burden at a time when crude oil prices were falling.

Sitharaman also did not make any announcements regarding removal of windfall tax. In July 2022, the Indian government had levied a windfall tax on locally-produced crude, as well as on the export of diesel and ATF (aviation turbine fuel), in line with the rise in international oil prices.

Crude oil prices have been volatile since the Russian invasion of Ukraine. The price of a barrel of crude — which currently trades below $80 — hit a 14-year high of more than $139 in March 2022.

Crude prices have come down in recent months due to deteriorating demand amid global inflation and recession fears. The volatility in the international market continues because the group of oil producing nations, or OPEC+, often cuts oil supply to support prices.