NEW DELHI: Finance ministry on Monday announced the scrapping of the windfall tax or special additional excise duty (SAED) on aviation turbine fuel (ATF), crude oil products, petrol and diesel.
The windfall tax, which targeted unexpected profits from domestic crude oil production, was first imposed in July 2022. As per the notification, the tax on the production of petroleum crude and the export of ATF, petrol, and diesel will no longer be levied.
This move is expected to benefit oil producers and refiners such as Reliance Industries and ONGC, potentially improving their refining margins. Shares of Reliance Industries rose following the announcement. ONGC shares closed at `257.65, up by 0.37%, while Reliance Industries shares closed at `1,310.60, up by 1.42%.
The decision to roll back windfall tax followed a review by the Prime Minister’s Office (PMO), the Revenue Department, and the petroleum ministry. It was also accompanied by the withdrawal of the Road and Infrastructure Cess (RIC) on the export of petrol and diesel.
The windfall tax was introduced in July 2022 in response to surging crude oil prices caused by the Russia-Ukraine war and Western sanctions on Russia. The tax rates were revised every fortnight based on international crude oil prices. However, with global crude oil prices stabilising around $70–$75 per barrel, the government decided to eliminate the levy. The rollback is believed to be a response to declining government revenues from tax, which fell from `25,000 crore in FY23 to about `6,000 crore in FY25.
The windfall tax was last revised on August 31, when it was set at `1,850 per tonne for crude petroleum. Export duties on diesel, petrol, and jet fuel had already been reduced to zero as of September 18, signalling the government’s intent to phase out the levy. Since its levy, the windfall tax has been a subject of controversy. While it initially sought to balance government revenue amid fluctuating oil prices, industry players argued it negatively impacted profitability and disincentivised production. For private and foreign players, it brought in an element of uncertainty.
Production continues to increase in November
With demand conditions remaining favourable, Indian manufacturers continued to scale up production. Although price pressures curbed domestic sales to a certain extent, the growth of new export orders gained momentum.