India’s Finance Ministry will consider a proposal to ditch the windfall tax on domestic crude oil production, amid much lower prices compared to when the levy was introduced in 2022, a senior government official said on Wednesday.
“Finance ministry will take a view …I think petroleum ministry has already written to them,” Tarun Kapoor, advisor to Prime Minister Narendra Modi, said today, as carried by Reuters.
The Indian Oil Ministry has asked the country’s Finance Ministry to consider scrapping the windfall tax on crude and petroleum products due to falling international oil prices, India’s broadcaster ET Now reported exclusively in August.
The oil ministry has sent a number of presentations to the finance ministry, in which it has said that oil companies are not making any windfall – or excessive – profits at crude oil prices below $80 per barrel.
India first introduced the windfall tax in July 2022, joining other governments in taxing the excessive profits of 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 products at home and export less.
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 September, the Indian government slashed the windfall tax on domestically produced crude oil to zero, effective September 18.
Now the government could altogether scrap the measure of taxing domestically produced crude as Brent oil prices are now about $75 per barrel, much lower than the average price of $94.50 per barrel in 2022, when oil hit a multi-year high of $123.70 a barrel after the Russian invasion of Ukraine.
By Tsvetana Paraskova for Oilprice.com