Windfall Tax on Oil Exports Cancelled! Here’s How It Affects Fuel Prices and Your Pocket
New Delhi (The Uttam Hindu): The government has revoked the windfall tax on crude oil and fuel exports, responding to industry calls amid declining international oil prices. On Monday, the government withdrew the nearly two-and-a-half-year-old tax on domestically produced crude oil and exports of petrol, diesel, and aviation turbine fuel, succumbing to the industry's request after the value of petroleum product exports sharply declined due to falling global oil prices.
The windfall tax, initially imposed on the petroleum sector starting July 1, 2022, was revoked by the Department of Revenue, which issued a notification on Monday rescinding the tax. The decision took immediate effect "in the public interest," according to an official source. The official explained that industry representatives argued that the tax was no longer justifiable, given that international oil prices had remained low for several months.
The government first imposed the windfall tax when private refiners began reducing domestic supply of transportation fuels and shifting to exports to capitalize on high overseas demand, driven by soaring international oil prices. At the time, Brent crude prices were between $110-$120 per barrel. However, since August 2024, Brent crude has remained consistently below $80 per barrel, with the current price hovering around $72 per barrel.
Recent trade data reveals that subdued international oil prices have significantly impacted India's petroleum product export revenue, which fell by more than two-and-a-half times, dropping to $312.50 per tonne in the first half of 2024-25 from $792 per tonne in the same period of 2023-24, despite a substantial increase in shipment volumes.
This decline in export earnings has negatively affected India's overall export performance. While the value of petroleum product exports dropped by over 12.7%, from $41.7 billion in April-September 2023 to $36.4 billion in the same period in 2024, the volume of exports surged by 121%, reaching 116.4 million tonnes compared to 52.7 million tonnes in the first half of FY24.
In addition to lifting the windfall tax, the government also removed the road and infrastructure cess (RIC) on the export of petrol and diesel. The RIC had initially been ₹6 per litre for both petrol and aviation turbine fuel (ATF), and ₹13 per litre for diesel. The cess on domestically produced crude oil was ₹23,250 per tonne, with rates reviewed bi-weekly based on international benchmarks. While petrol exports became exempt from the windfall tax starting the next fortnight, the tax on other items was eventually reduced to zero. No windfall tax has been levied since September 2024.
