Centre to wind up windfall tax on crude production, exports as oil prices slide: Report

The government has decided to scrap the windfall tax on domestic crude oil production and fuel exports as global oil prices remain subdued, according to a report by Mint. The finance ministry is expected to issue an official order soon, it said.

The windfall tax was introduced in 2022, when oil prices surged to multi-year highs due to the Russia-Ukraine conflict, enabling oil companies to reap significant profits. The tax, imposed on both local crude oil production and exports of petrol, diesel, and jet fuel, is a special additional excise duty that is reviewed every fortnight based on the average prices of oil in the preceding two weeks.

The petroleum ministry had reportedly urged the finance ministry to repeal the tax, citing the sustained easing in oil prices and the diminishing relevance of the levy, the Mint report said.

As of September 18, 2023, the windfall tax on crude oil production was reduced to zero, down from Rs 1,850 per tonne in the first fortnight of the month. The government had dialled back several components of the tax as the global prices softened, but industry stakeholders had expressed a desire for more certainty. Businesses, especially those involved in exploration, production, and refining, have called for an end to the fortnightly review and revision process which, they say, adds to the uncertainty in an industry requiring heavy capital investment.