India Increases Windfall Tax on Crude Oil

• India has increased its windfall tax on petroleum crude to $83.75 per metric ton effective July 16th for a two-week period.
• The windfall tax, levied as a Special Additional Excise Duty (SAED), aims to capture excess profits from energy companies.
• India first introduced the windfall tax in July 2022 and has been adjusting the rates based on average oil prices.

India has raised its windfall tax on petroleum crude effective July 16, the government said in a notification on Monday. 

The windfall tax on petroleum crude was revised up to $83.75 (7,000 Indian rupees) per metric ton, up from $71.78 (6,000 rupees) per ton. 

The raised tax, which is being levied in the form of a Special Additional Excise Duty (SAED), will be effective for two weeks starting on Tuesday. 

India first introduced the windfall tax in July 2022, joining other governments in taxing excessive profits at the energy companies. India slapped the windfall tax on the country’s oil producers and oil refiners who were exporting more due to the high international price of crude oil and refined products. The new taxes were aimed to serve as an incentive to keep more product at home and export less.  

“As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market,” a government-issued statement said at the time.  

Since then, India has been reviewing the tax rates on crude oil and fuels every two weeks, based on the average oil prices in the past two weeks.

Apart from petroleum crude produced domestically, the government is taxing with a windfall tax gasoline, diesel, and aviation turbine fuel (ATF), too. 

In the previous two-week period between July 1 and 15, India had nearly doubled the windfall tax on crude to $71.78 (6,000 rupees) per ton from $38.90 (3,250 rupees). 

The windfall tax on gasoline, diesel, and jet fuel will remain at zero in the second half of July, as it has been for months. 

Meanwhile, fuel consumption in India, the world’s third-largest crude oil importer, rose by 2.6% in June 2024 compared to the same month of 2023, government data showed earlier this month. Consumption, however, was down compared to May this year, with diesel consumption falling by 5%, according to estimates by Reuters.    

By Michael Kern for Oilprice.com

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