Windfall tax on local crude, ATF, diesel raised: All you need to know

Windfall tax or the special additional excise duty (SAED) on domestically produced crude oil has been raised to Rs 11,000 per tonne from Rs 8,000, as per a notification issued by the Finance Ministry.

The SAED on aviation turbine fuel (ATF) has also been increased from nil to Rs 3.50 per litre, and on diesel from Rs 5 to Rs 10.5 per litre.

Windfall tax was introduced by the government on July 1 to charge the industry for the large profit it has been earning through the sale of refined crude in the international market. Its quantum is reviewed at every fortnight.

On October 2, at the sixth fortnightly review, the Centre had reduced the tax on domestically produced crude to Rs 8,000 per tonne from Rs 10,500 per tonne. It had also scrapped the SAED of Rs 5 per litre on jet fuel and halved the levy on export of diesel to Rs 5 per litre.

On petrol exports, the windfall tax was removed on July 20, and has not been reinstated so far.

The fresh decision to raise the tax on diesel and domestically produced crude, and to reinstate it for ATF exports, comes around a week after the Organization of the Petroleum Exporting Countries (OPEC) announced a reduction of crude supply in the global market.

OPEC+ on October 6 said it was slashing the total output by two million barrels per day -- the largest supply cut since 2020 -- despite the United States raising apprehensions.

Following the OPEC+ move, oil prices in the international market jumped to a five-week high on October 7, inching closer to the $100-mark.

The oil rally, however, did not last long as fears of a global recession and the weakening of demand in China led to a drop in prices this week. On October 14, the rates plummeted by over three percent, with Brent crude futures settling at at $91.63 a barrel, and the U.S. West Texas Intermediate (WTI) crude futures falling to $85.6.