The Finance Ministry is assessing the potential removal of the windfall tax and monitoring the trend of crude oil prices before making a decision, according to a Reuters report.
Business Today was unable to verify the development independently.
Introduced in July 2022, the windfall tax was a special levy on domestic crude oil production, aimed at capturing revenue from the unexpected profits of producers due to soaring global oil prices. In addition to the crude oil levy, the government imposed special taxes on the export of diesel, petrol, and aviation turbine fuel.
By the end of August, the windfall tax on domestically produced crude oil was reduced to Rs 1,850 ($21.90) per tonne and was eventually eliminated on September 18. Taxes on the export of diesel and aviation turbine fuel were also removed.
India first introduced windfall profit taxes on July 1, 2022, following the global trend of taxing extraordinary profits in the energy sector. The tax rates are reviewed every two weeks, based on the average oil prices of the previous fortnight.
The finance ministry will evaluate scrapping windfall tax on domestic crude oil output, Tarun Kapoor, adviser to the Indian prime minister, said last month. Officials said after decline in global crude oil prices, there was little justification for maintaining the tax.
The Union government is now considering a reduction in fuel prices as crude oil prices have fallen to a nine-month low, according to senior government sources who spoke to Business Today TV.
The drop in oil prices has boosted the profitability of Oil Marketing Companies (OMCs), offering an opportunity to ease prices for consumers. This move is also seen as a response ahead of the upcoming Maharashtra and Haryana Assembly elections.
The last reduction in fuel prices, by Rs 2 per litre, occurred on March 14, just before the general elections. The windfall tax, implemented through the Special Additional Excise Duty (SAED), was maintained at zero for the export of diesel, petrol, and jet fuel (ATF).