Govt cuts windfall tax on crude to Rs 2,100/tonne; scraps diesel, ATF levy

The central government has reduced the windfall tax on petroleum crude to Rs 2,100 per metric tonne, down from Rs 4,600 per tonne, effective August 17.

Earlier, on July 31, the windfall tax on crude was cut by 34.2 per cent to Rs 4,600 per tonne. Additionally, there will be no windfall tax on the export of diesel and aviation turbine fuel (ATF).

India began imposing a windfall tax on crude oil producers in July 2022 and extended it to include the export of gasoline, diesel, and aviation fuel. This move was prompted by private refiners preferring to sell fuel internationally to capitalise on refining margins rather than selling it domestically.

The government adjusts the windfall tax on petroleum crude every two weeks, taking into account fluctuations in international crude and product prices. Windfall taxes are imposed by governments when an industry experiences unusually high profits, often due to unforeseen circumstances.

Global crude oil prices

Oil prices dropped by about 2 per cent on Friday and were on track to end the week at nearly the same levels as the previous week, with Brent crude trading just below $80 per barrel. This decline occurred as investors scaled back their expectations for demand growth from China, the world’s largest oil importer, according to a report by Mint.

Brent crude futures fell by $1.06, or 1.3 per cent, to $79.98 per barrel, while US West Texas Intermediate crude futures dropped by $1.22, or 1.6 per cent, to $76.94 per barrel. Brent futures had closed last week at $79.66 per barrel, while WTI futures ended at $76.84 per barrel, the report said.

Economic data from China on Thursday revealed a slowdown in July, with new home prices falling at the fastest rate in nine years, industrial output decelerating, and unemployment rising. These developments have heightened concerns about a potential decline in demand from China, with refineries in the country significantly reducing crude processing rates last month due to weak fuel demand, the report stated.

In contrast, a series of data releases from the US provided some support for oil prices: retail sales surpassed analysts' forecasts, and the number of new jobless claims filed by Americans last week was lower than expected, renewing optimism about economic growth in the world’s largest oil market, the report further said.