As oil prices inch up, India raises windfall tax on crude petroleum to Rs 6,800/tonne

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

The government has seemingly opted for a significant hike on windfall taxes on crude petroleum with global oil prices inching up again.

Oil prices continued their upward trajectory amid worries over potential disruptions in supply due to escalating geopolitical tensions, on April 3. But, some of these concerns were mitigated by an unexpected increase in US crude oil inventories.

While, Brent crude futures climbed by 84 cents, witnessing an increase of 0.9 percent to $89.76 per barrel on April 3, US West Texas Intermediate futures rose by 76 cents to $85.91 per barrel.

A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel. Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products.

Also read: High crude oil prices a cause for concern, says oil secretary Pankaj Jain

India first imposed a windfall tax on crude oil producers in July 2022 amid soaring crude oil prices and extended the levy on exports of gasoline, diesel and aviation fuel as private refiners wanted to sell fuel overseas to make gains from robust refining margins instead of selling locally. Windfall tax is levied by governments when an industry unexpectedly earns large profits.

Rising crude oil prices are a cause for concern for the world's third-largest importer of the commodity, India's oil secretary Pankaj Jain said on April 3. As a consuming nation any increase in prices will cause concern and anxiety, Jain said at an event, referring to the "geopolitical premium" in crude prices, reported news agency Reuters.