Windfall tax removed on domestically-produced crude oil, halved on diesel exports; here are key takeaways

Windfall tax cut: The government on Tuesday removed a windfall tax on domestically-produced crude oil, effective immediately. The duty — introduced in July to encourage private refiners to sell domestically instead of exporting — stood at Rs 3,500 per tonne. The Centre also cut the levy on diesel to Re 0.5 per litre from Re 1 per litre.

Here are 10 things to know about this big story: 

1. With the latest move on windfall tax, the levy on crude oil, aviation turbine fuel (jet fuel) and petrol stands at nil. 

2. According to the official notification on April 4, the windfall tax on exports of jet fuel and petrol is unchanged.

3. The government had earlier removed the duty on jet fuel and petrol.  

4. The latest action on windfall tax comes close on the heels of a surge in global crude oil prices triggered by a surprise cut in output by the OPEC+ grouping of top producers this week. The reduction is to the tune of about 1.2 million barrels a day.

5. That has, however, lifted benchmark Brent from 15-month lows near &70 per barrel last month. 

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6. On Monday, Brent jumped by $5 — or more than six per cent — to settle at $84.9 a barrel. West Texas Intermediate (WTI) crude also surged more than six per cent to end at $80.4 a barrel.

7. The government intends to withdraw the windfall tax once global crude rates fall cool off from the $70 a barrel mark, news agency Reuters quoted a top government official as saying last year.

8. The fall to the lowest levels since late-2021 — a boon for India, which meets about four-fifths of its oil requirement through imports — was driven by weakening demand.

9. The windfall tax is aimed at discouraging domestic refiners to sell outside India to benefit from refining margins in global markets.

10. The windfall tax rates are reviewed every fortnight basis average global oil rates in the past fortnight. 

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