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Windfall tax on petroleum crude oil raised, cut to nil on diesel and ATF
India has hiked the windfall tax on crude oil while reducing the tax on diesel and aviation turbine fuel, according to a government notification. The government hiked the windfall tax on petroleum crude oil to 2,300 Indian rupees ($27.63) a ton from 1,300 rupees, it said.
A tax on diesel of 0.5 rupee per litre was eliminated, it said as was a one rupee per litre windfall tax on aviation fuel. The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.
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.
Concerns over demand due to a weaker global economy and rising crude inventories in the US have led to lower crude prices in November and December. Experts believe that only geopolitical tensions in the Middle East could drive up oil prices. Lower demand and higher oil output are expected to weigh on crude oil prices in early 2024. Demand from China, which is the largest energy consumer in the world, has not recovered amid the economic slowdown in the country.
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