The Government of India has reimposed a windfall tax on domestic petroleum crude from July 15, according to a government notification. Special Additional Excise Duty (SAED) on crude petroleum has been raised from zero to Rs 1,600 per metric tonne. The country’s finance ministry said in a notification that the changes will come into effect from Saturday, with the government leaving the windfall tax on diesel, petrol and aviation turbine fuel unchanged at zero. In May, India reduced the windfall tax on petroleum crude from Rs 4,100 per tonne to zero.
Last July, India imposed a windfall tax on crude oil producers and extended levies on exports of gasoline, diesel and ATF. While duty was levied on exports of petrol, diesel and jet fuel (ATF), a special additional excise duty (SAED) was levied on locally produced crude oil.
Today’s revision comes in the backdrop of rising oil prices. Tax rates are reviewed every two weeks based on the average oil price of the last two weeks.
A windfall profit tax is calculated by taking any price that producers receive above a threshold.
Global oil prices have risen to near three-month highs in recent days after US inflation data suggested interest rates in the world’s largest economy were at their highest. International Brent crude futures were above $80 a barrel. Data on Wednesday showed US consumer prices rose modestly in June and posted the smallest annual increase in two years as inflation continued to ease.
The data caused the US dollar index to fall to its lowest level since April 2022, helping boost oil prices. A weaker dollar lowers crude prices for holders of other currencies. Supply disruptions in Libya and Nigeria are also supporting oil price increases. Oil prices rose more than 11 percent in two weeks, primarily due to supply cuts from top producers Saudi Arabia and Russia. A report by the International Energy Agency (IEA) on Thursday forecast oil demand will reach a record high this year, although broader economic headwinds and interest rate hikes mean the increase will be slightly lower than previously expected.