Government Cuts Windfall Tax on Domestic Crude Oil

1 Aug 2024 , 11:27 AM

Shares of upstream oil companies like Oil and Natural Gas Corp Ltd, Oil India Ltd and Vedanta Ltd rose on Thursday amid announcement of a cut in windfall tax on crude oil. The shares of the PSU oil companies were up 3-6% in early trade on Thursday, while those of Vedanta were up 0.6%.

The Indian government has cut the special additional excise duty, or windfall profits tax, on domestically produced crude oil by ₹2,400 per ton to ₹4,600 per ton with effect from August 1, the finance ministry said on late Wednesday.

The duty on windfall profits of domestic crude oil and export of petrol, diesel and aviation turbine fuel was imposed on July 1, 2022, following the sharp rise in crude oil prices in the aftermath of Russia’s invasion of Ukraine.

The windfall tax on export of petrol, diesel and aviation turbine fuel has since been cut to zero.

The government reviews the windfall tax on a fortnightly basis based on crude oil prices and margins on fuel products in the international market.

The windfall tax roughly translates to $7.5 per barrel compared with around $40 a barrel when the levy was first introduced two years ago.

The Brent crude is currently around $80 per barrel compared with $109 per barrel when the duty was first imposed two years ago.