The Union government announced on April 3 a significant increase in windfall tax on crude petroleum, raising it to Rs 6,800/tonne from Rs 4,900/tonne. The new rates will come into effect from April 4, impacting the petroleum industry.
This tax is imposed in the form of Special Additional Excise Duty (SAED) and is reviewed every fortnight based on the average oil prices in the preceding two weeks.
The decision follows the government’s earlier move on March 15 to raise the windfall tax on crude petroleum from Rs 4,600/tonne to Rs 4,900/tonne. However, the Special Additional Excise Duty (SAED) on the export of diesel, petrol, and Aviation Turbine Fuel will remain at zero.
The increase in windfall tax coincides with the global trend of rising oil prices, which continued to climb amid concerns over potential disruptions in supply due to escalating geopolitical tensions. On April 3, Brent crude futures surged by 0.9 percent to $89.76 per barrel, while US West Texas Intermediate futures rose to $85.91 per barrel.
A windfall tax is imposed on domestic crude oil when global benchmark rates exceed $75 per barrel. Similarly, the tax applies to the export of diesel, ATF, and petrol if product margins rise above $20 per barrel.
Rising crude oil prices have raised concerns for India, the world’s third-largest importer of crude oil. Pankaj Jain, India’s oil secretary, expressed apprehensions about the impact of increasing prices, referring to the “geopolitical premium” in crude prices.
The decision to increase windfall tax aims to mitigate the impact of rising oil prices and ensure stability in the petroleum market, but its implications for consumers and the industry remain to be seen.