The windfall tax, introduced on July 1, 2022, targets the excessive profits of energy companies and is updated every 15 days based on international crude oil prices. Managed by the Department of Revenue, the tax formula adjusts in response to changes in global oil prices.
Jain indicated that the recent decline in crude oil prices has led the government to reassess the necessity of the windfall tax, particularly as it seeks to provide relief to refining companies.
It’s important to note that reducing or removing the windfall tax will not impact India’s oil imports from Russia. India will continue to base its crude oil imports on its demand and needs, irrespective of any changes to the tax..
Petrol, diesel prices may be cut
Indians may soon see much-needed relief from high petrol and diesel prices, as global oil prices have recently dropped to near three-year lows. Jain mentioned that if crude prices stay low for an extended period, oil companies might consider reducing fuel prices.
On Tuesday, Brent crude, the main international oil benchmark, fell below $70 per barrel for the first time since December 2021. This decline, driven by concerns over slowing economic growth and its effect on fuel demand, has significantly increased the profitability of fuel marketing companies, especially the state-run firms that control 90% of India’s market.
The government has already acted on the lower prices by instructing Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) to reduce petrol and diesel prices by ₹2 per litre on March 14, in the lead-up to the general elections. Further cuts could be on the horizon if the current crude price slump continues.
Fuel prices in many Indian states remain high, with petrol still above ₹100 per litre and diesel exceeding ₹90 per litre. These high prices have been a major driver of inflation, affecting everything from transportation to cooking, and placing severe cost pressure on households.
Oil Secretary also reiterated India’s request to OPEC+ to boost oil production, citing rising fuel demand in countries like India. However, the secretary stressed that any reduction in petrol and diesel prices would depend on the sustained lower levels of crude oil prices over time, giving much-needed relief to consumers ahead of elections in key states such as Maharashtra and Haryana