Windfall taxes virtually scrapped, for now
New Delhi, April 4, 2023
The government has temporarily scrapped the windfall tax on crude oil production by reducing the special additional excise duty (SAED) levied on oil producers since last July, from ₹3,500 per tonne to zero. But with global oil prices resurging after the OPEC announced production cuts, experts believe the tax will be raised again soon.
In its latest periodic review of the windfall levies, the Centre also halved the levy on diesel exports to ₹0.50, effective April 4. The same tax on Aviation Turbine Fuel and petrol had already been slashed to nil earlier.
“There was a moderation in crude oil prices closer to the last revision in SAED on March 21,” said Sabyasachi Majumdar, senior vice president and group head - corporate ratings at ICRA, about the rationale for the latest duty reductions.
“However, crude oil prices have jumped since the OPEC+ announcement of additional production cuts of 1.16 million barrels per day. Hence, the SAED can be expected to increase in the next revision if the crude prices remain elevated,” Mr. Majumdar noted.
ICRA estimates that the government’s collection from the SAED imposed on the production of crude oil and the export of petroleum products from July 1, 2022, is around ₹40,000 crore in the financial year 2022-23.
“For now, the oil producing companies can heave a sigh of relief, but for how long would remain up for speculation,” said Sumit Singhania, partner at Deloitte India.