Finance Minister Nirmala Sitharaman has not made any announcement regarding a cut in cess on crude oil in the interim Budget 2024 presented on February 1.
Nirmala Sitharaman tabled the Budget 2024 as a vote-on-account ahead of the general elections scheduled for April-May 2024. A full Budget for FY25 will be presented after the new government comes to power.
The energy industry has been demanding a cut in cess arguing that it puts them at a disadvantage against imported oil as cess is not imposed on imported oil. Also, a move in that direction was expected, as the government has intensified its focus on energy security and is promoting domestic production of oil and gas in the country.
A cess reduction, if implemented, can boost the revenue of crude oil exploration and production companies like Oil and Natural Gas Corporation (ONGC) and Oil India Limited.
In Union Budget 2016-17, the government had revised the way charges were levied on oil cess, by moving from a specific charge of Rs 4,500 per tonne of crude to an ad valorem rate of 20 percent. The decision was meant to reduce the high cess burden at a time crude oil prices were falling.
In July 2022, the Indian government also levied a windfall tax on domestically produced crude oil as well as on the export of diesel and ATF, in line with the rise in international oil prices. Notably, the FM has not made any remarks on the removal of windfall tax.
Crude oil prices have been volatile since Russia’s invasion of Ukraine in 2022. Crude prices are currently trading around $80 per barrel due to demand worries. Volatility in the international oil market is also on account of supply cuts by oil-producing nations or OPEC+ and geopolitical tensions in the Middle East.
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