The government announced the withdrawal of the windfall tax on Aviation Turbine Fuel (ATF), crude oil, petrol and diesel through a notification tabled in the Lok Sabha on Monday. This decision comes as a significant relief for oil giants such as Reliance and ONGC, enabling them to improve their profit margins on refining operations.
The windfall tax, introduced in July 2022, was designed to tap into the higher revenues earned by oil companies due to rising global crude prices and increased refining margins. However, with international crude prices stabilising, the rationale for the tax has diminished.
A notification from the Ministry of Finance stated that the Special Additional Excise Duty (SAED), widely known as the windfall tax, will no longer apply to petroleum crude production or the export of ATF, petrol and diesel. The tax had been revised fortnightly based on fluctuations in global oil prices.
The Department of Revenue managed the tax formula, adjusting it in line with crude oil price changes. However, as average crude prices have declined, the government’s revenue from the tax has dwindled, leading to the decision to repeal it entirely.
The move is expected to bolster the profitability of oil companies and reduce regulatory overheads, marking a positive development for the energy sector. The withdrawal also shows Centre’s adaptive policy approach, responding to evolving global market dynamics. Energy stocks like ONGC, Oil India, Jindal Drill, Hind Oil and Oil marketing PSUs like IOC, HPCL and BPCL would be in focus after this decision.
(With inputs from agencies)