India lowers windfall tax on crude petroleum to Rs 9,050 per tonne

The Indian government on Tuesday (October 17) announced reduction of special additional excise duty (SAED) on crude petroleum from Rs 12,100 per tonne to 9,050 per tonne with effect from October 18, 2023.

Besides, SAED or duty on diesel will be reduced to Rs 4 per litre from Rs 5 per litre and the duty on jet fuel or ATF will be lowered to Re 1 per litre from Rs 2.50 per litre currently.

The South Asian nation first imposed windfall profit taxes on July 1, 2022, joining a growing number of nations that tax super-normal profits of energy companies. At that time, the government levied Rs 6 per litre ($12 per barrel) on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.

This decision comes at a time when the prevailing geopolitical tension in West Asia has raised possibilities of crude oil price hikes, as per many experts. The global crude oil market is on tenterhooks as tensions in the Middle East continue to surge, said Peter McGuire, CEO of XM Australia, while pointing to the potential for crude oil prices to skyrocket to the $100 per barrel mark.

“It has got the potential to be up higher, I mean it has just been dynamic. So, possibly $95/bbl, maybe $100/bbl in this rally,” said McGuire in an interview with CNBC-TV18.

Also, in an interaction with CNBC-TV18, Harsha Upadhyaya, Chief Investment Officer at Kotak Mahindra Asset Management Co. said that there could be some pressure on margins due to crude prices moving upwards.

“We have seen a 30% rise in crude prices over the last 3 months, from $70 to $90 a barrel. So there has already been an increase. This will flow into margins over the next 1-2 quarters with a lag,” he said.