The Indian government has officially scrapped the windfall tax on exports of petrol, diesel, and aviation turbine fuel (ATF) as of December 2, 2024. This decision was formalized through notifications from the Finance Ministry and follows a review involving the Prime Minister’s Office and relevant ministries.
Background of the Windfall Tax
The windfall tax, also known as the Special Additional Excise Duty (SAED), was introduced in July 2022 during a period of high global crude oil prices exacerbated by the Russia-Ukraine conflict. The tax aimed to capture extraordinary profits from oil producers and exporters, generating significant revenue for the government during the pandemic years.
Revenue from this tax peaked at ₹25,000 crore in FY23 but saw a drastic decline to ₹6,000 crore projected for FY25, indicating diminishing returns as crude prices stabilized around $70-$75 per barrel.
Implications of Scrapping the Tax
Economic Impact: The removal of the windfall tax is expected to benefit major oil companies like Reliance Industries and ONGC by enhancing their refining margins. Following the announcement, shares of Reliance rose significantly.
Consumer Relief: Airlines may experience reduced operational costs, potentially leading to lower airfares. Additionally, consumers could see a decrease in prices for petrol and diesel as oil companies adjust to the new tax environment.
Policy Shift: This move reflects an adaptive fiscal policy aimed at fostering economic growth in the energy sector while responding to changing market conditions.
In conclusion, the scrapping of the windfall tax marks a significant shift in India’s approach to energy taxation, aiming to support both domestic industries and consumer interests amid fluctuating global oil prices.
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