New Delhi: Amid reports of an anticipated decrease in petrol and diesel prices in India, the central government has opted to increase the tax on crude oil while simultaneously reducing taxes on diesel and aviation turbine fuel, according to a recent notification.

The windfall tax on petroleum crude oil has been raised to ₹2,300 ($27.63) per ton from ₹1,300, according to a government notification. Additionally, the tax on diesel has been eliminated by ₹0.5 per litre, and the tax on aviation fuel has been reduced by ₹1.

In July 2022, India implemented a windfall tax on crude oil producers and extended the levy to exports of gasoline, diesel, and aviation fuel. This move was made as private refiners sought to capitalize on strong refining margins by selling fuel overseas rather than domestically.

The windfall tax is typically imposed when an industry experiences unexpectedly high profits, and in India’s case, it is triggered when global benchmark crude oil prices exceed $75 per barrel.

The decision to increase the windfall tax on crude oil by the Indian government comes shortly after reports suggesting a potential reduction in petrol and diesel prices nationwide in 2024, ahead of the upcoming Lok Sabha elections scheduled for April-May.

The Centre is reportedly in discussions about the potential reduction of petrol and diesel prices, considering a cut of ₹10 per litre, ahead of the 2024 Lok Sabha elections. The Union Finance Ministry has proposed the price cut to the Centre, reminiscent of a similar move made two years ago when the government reduced petrol and diesel prices by ₹8 and ₹6, respectively.

Previously, petrol and diesel prices in India were reduced after reaching record highs, driven by a surge in global crude oil prices due to the Covid pandemic and the Russia-Ukraine conflict. As of now, petrol prices in Delhi are ₹96.72 per litre, and diesel prices are ₹89.62 per litre.