NEW DELHI: The government on Tuesday scrapped the windfall tax on domestically produced crude oil, set to take effect from September 18. The tax, imposed as a Special Additional Excise Duty (SAED), was reduced from Rs. 1850 per tonne to nil.This is the second time since the tax was introduced in July 2022 that it has been reduced to nil. The last time the SAED was reduced to zero was on April 4, 2023. The SAED on the export of diesel, petrol, and jet fuel or ATF remains at nil. The windfall tax is levied fortnightly based on average oil prices in the preceding two weeks. The last revision took place on August 31, when the tax on crude petroleum was set at Rs.1850 per tonne.India first imposed windfall profit taxes on July 1, 2022, joining other countries that tax the excessive profits of energy companies. The levy on exports of petrol, diesel, and aviation fuel was introduced to encourage private refiners to sell fuel domestically instead of exporting it to benefit from higher refining margins.The decision to scrap the windfall tax comes as global benchmark Brent crude prices have fallen below USD 75 a barrel from over USD 92 a barrel in April. A windfall tax is a levy imposed by governments when an industry unexpectedly earns large profits, mainly due to an unprecedented event. This move may lead to expectations of price cuts for petrol and diesel, as the government reviews the decline in international crude oil prices. Recently, Pankaj Jain, Secretary at the Ministry of Petroleum and Natural Gas, also mentioned that he is discussing the possibility of withdrawing the windfall tax on crude oil exports with the Finance Ministry. He also mentioned that Oil Marketing Companies (OMCs) may consider reducing petrol and diesel prices domestically if international crude prices remain low for an extended period.
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