New Delhi: The Ministry of Finance in the Union has implemented a marginal increase in the windfall tax for domestic crude oil sales, now set at ₹3,300 per tonne. Additionally, a special additional excise duty (SAED) of ₹1.5 per litre on diesel exports has been reintroduced.
Over the preceding two weeks, the special additional excise duty (SAED) applied to the sale of domestically produced crude oil remained at ₹3,200. Simultaneously, there had been no duty imposed on the export of diesel since January 1st.
Revised duties, as outlined in a notification by the Department of Revenue under the finance ministry, are scheduled to take effect from Friday. The windfall tax on the sale of domestically produced oil sees a marginal increase, reaching ₹3,300 per tonne, while a reintroduced special additional excise duty (SAED) of ₹1.5 per litre is imposed on diesel exports. Notably, there is no change in the additional excise duty on the export of petrol and aviation turbine fuel, both remaining at zero.
This adjustment in windfall tax coincides with a period of global oil market volatility amid the Red Sea crisis. As of the latest update, the April contract of Brent on the Intercontinental Exchange is trading at $81.97 per barrel, representing a 0.45% increase from its previous close.
On February 14, the Indian crude oil basket, reflecting the sour grade (Oman and Dubai average) and sweet grade (Brent Dated) processed in Indian refineries, stood at $83.08 a barrel.
The initiation of windfall taxes on locally produced crude oil dates back to July 1, 2022, in response to substantial profits made by oil exploration and producing companies amidst multi-year high crude oil prices following Russia’s invasion of Ukraine. Additionally, the imposition of extra levies on the export of petrol, diesel, and jet fuels was prompted by private refiners favoring international sales due to better prices, as opposed to the domestic market.
These additional levies are subject to fortnightly reviews based on average oil prices in the preceding two weeks.
The future holds expectations of sustained volatility in international crude oil prices, with the Organization of the Petroleum Exporting Countries (OPEC) foreseeing robust demand in the oil market for 2024 and 2025. In contrast, the International Energy Agency (IEA) has taken a divergent stance by revising down its growth forecast for 2024, expressing that global oil demand growth is losing momentum.
According to the IEA’s latest monthly report, the projection for global oil demand growth in 2024 is set at 1.22 million barrels per day (bpd), a slight reduction from the estimate provided in the previous month. In contrast, OPEC, earlier in the week, maintained its more optimistic growth forecast at 2.25 million bpd. These differing perspectives contribute to the uncertainty surrounding future oil market dynamics.