Windfall tax on crude, jet fuel, diesel exports cut

The finance ministry cut the tax to ₹1,700 per tonne from ₹4,900 prevailing over the past two weeks.

Further, a government notification dated 15 December said the tax on exporting aviation turbine fuel, or jet fuel, had been slashed by 70% to ₹1.5 per litre from ₹5 per litre.

The windfall tax on diesel exports was lowered by 38% to ₹5 from ₹8, while that on petrol continues to be ‘nil’.

When the levy was first introduced, a windfall tax on the export of petrol alongside diesel and jet fuel was levied. The special additional excise duty on jet fuel and diesel has been lowered, while the tax on petrol was scrapped in subsequent fortnightly reviews.

The cut in the windfall tax on locally produced crude oil comes at a time when oil prices have largely remained below the $80 per barrel mark. The February contract of Brent on the Intercontinental Exchange was trading at $79.56 per barrel on Friday evening.

The January contract of West Texas Intermediate fell 2% to $74.59 per barrel.

The windfall tax on crude oil is calculated by taking away any profit producers are earning above a threshold.

The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily the difference between the international oil price realized and the cost.

The volatility in crude prices is expected to continue with uncertainty in the global markets and China relaxing its zero-covid policy.

Crude prices have largely been subdued despite the price cap on Russian seaborne crude oil coming into effect on 5 December.

The windfall tax was first imposed on 1 July as energy companies were making huge profits amid multi-year high levels of crude oil prices due to the Russia-Ukraine conflict.

At that time, export duties of ₹6 per litre each were levied on petrol and aviation turbine fuel and ₹13 a litre on diesel. The windfall tax on the sale of locally produced crude oil was ₹23,250 per tonne when the tax was first imposed.

The windfall taxes are reviewed every fortnight.

The levy was expected to compensate for the reduction in the excise duty on petrol and diesel by the Centre to provide relief to consumers.

On 8 November, Mint had reported that nearly four months after introducing a windfall tax on refiners and local crude oil producers, the government has managed to garner only ₹2,500-3,000 crore a month from the levy, far less than it needs to fully make up for the losses in revenue due to excise cuts.