After a four-year run, windfall tax nears end of the road

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Subscribe to enjoy similar stories. New Delhi: The Centre has decided to scrap the windfall tax, a levy imposed on local production of crude oil and exports of petrol, diesel and jet fuel, at a time of subdued oil prices. A decision to this effect has been taken at the top level in the government, and the finance ministry may shortly issue an order, two people familiar with the development said.

Windfall tax was imposed in 2022, as a surge in oil prices to multi-year highs in the wake of the Russia-Ukraine war allowed oil and gas companies to make windfall profits. The tax is levied in the form of a special additional excise duty, and as additional excise duty or road and infrastructure cess on the export of fuel. It is reviewed every fortnight, based on their average prices in the preceding two weeks.

"The petroleum ministry recently wrote to the finance ministry and sought scrapping of the levy. With oil prices remaining subdued, there is not much significance in the levy anymore," said one of the two people quoted above. Queries emailed on Thursday to the petroleum and finance ministries remained unanswered.

The decision to scrap the windfall tax has been guided by the government’s view that this levy has outlived its utility. Since domestic oil producers and refiners are allowed to realize global prices from the Indian market, windfall tax fetches a share of the profits of the oil companies to the government. Windfall tax on crude oil produced in the country was lowered to zero on 18 September from ₹1,850 a tonne that was in force in the first fortnight of the month.