India Ups Windfall Tax on Crude as Global Prices Spike

The Indian government has increased the windfall tax on crude oil from Rs. 6,800 to Rs. 9,600 per metric ton, effectively from Tuesday onwards. This move is part of the government's bi-weekly revision of taxes.

India Raises Windfall Tax on Crude Oil Amid Surging International Prices

New Delhi, April 16: In a significant move to tap into the windfall gains enjoyed by domestic oil producers, the Indian government has hiked the windfall tax on crude oil to Rs 9,600 per metric ton, effective Tuesday. This represents a substantial increase from the previous levy of Rs 6,800.

The decision, announced as part of the government's fortnightly revision of windfall taxes, comes amidst a surge in global crude oil prices, which have been fueled by the ongoing geopolitical tensions. While this increase will allow the government to augment its revenue base, it is expected to impact upstream oil exploration and production companies such as ONGC and Oil India Ltd.

These companies may not fully benefit from the rising international prices for their crude due to the imposition of the windfall tax. However, the government has emphasized that the additional revenue will be utilized to fund essential social welfare schemes for the economically disadvantaged population, ensuring their well-being. Moreover, the tax increase is aimed at maintaining fiscal discipline and keeping the government's expenditure within manageable limits.

The windfall tax on crude oil was initially imposed in July 2022. It was subsequently extended to gasoline, diesel, and aviation fuel exports after private refiners began reaping substantial profits from robust refining margins in overseas markets, rather than supplying the domestic market with these products.

The government's decision reflects its commitment to balancing the interests of various stakeholders, including consumers, producers, and the overall economy. By adjusting the windfall tax rates in response to changing market conditions, the government aims to ensure that the benefits of rising global oil prices are equitably distributed while safeguarding the interests of vulnerable populations.