The Indian government has announced the immediate scrapping of the windfall tax on crude products, aviation turbine fuel (ATF), petrol, and diesel exports. This move is expected to bring major relief for oil producers and refiners across the country.
According to a report, senior government officials, including those from the Prime Minister’s office, conducted a comprehensive review of the tax, which was first imposed in July 2022. After discussions with the Revenue Department and the Petroleum Ministry, the decision was made to discontinue the levy.
The windfall tax was introduced on July 1, 2022, after the prices of global crude started to soar. The intention was to capture excess revenues that domestic oil producers made because of unexpected gains.
Sources quoted said that a number of reasons led to the abolition of the tax. The levy was not fetching much revenue and the oil industry had been objecting to the imposition from the beginning. “The industry was unhappy with the tax since its inception. It was not encouraging increased production levels, leading the PMO to opt for its discontinuation,” the sources said.
Besides, average crude prices had also stabilized and many segments of the tax, including those on ATF, petrol, and diesel, had become nil. The government felt there was no point in keeping a tax which was not bringing in adequate revenue.
Since its introduction, the windfall tax had been revised every 15 days based on international crude oil prices but became increasingly controversial. Initially intended to balance government revenue amid volatile oil prices, it faced criticism for negatively affecting profitability and discouraging production. In recent months, a decline in global crude prices further diminished the tax’s effectiveness.
