India cuts aviation fuel export tax, windfall tax on crude oil

Effective from Tuesday, January 17th 2023, the Centre has passed a decision which will lower the windfall profit tax on crude to Rs.1,900 per tonne from Rs.2,100 per tonne. In addition, export taxes on Aviation Turbine Fuel (ATF) have been revised to Rs.3.5 per litre from Rs.4.5 per litre while export taxes on diesel have been cut to Rs.5 per litre, down from Rs.6.5 per litre earlier.  

This move by the Centre has come at a time when private refiners are looking for overseas markets to gain profits from sturdy refining margins, instead of selling at home at cheaper rates. Private refiners are able to reap the benefit of such robust margins due to the Russian conflict, as a result of which a $60 price cap has been levied upon Russian oil by the West. In light of this, India has gone from importing just over 0.2% crude from Russia in 2021, to increasing the Russian market share in Indian oil demands to 25% in 2022.
 

The exchequer will now get a fair share of the gains from the windfall taxes which private parties enjoy. The domestic demand for oil will also be taken care of as refiners will now shore up local supplies by virtue of higher export taxes. This will ensure that the oil extractors and the upstream players do not earn monopoly profits on commodity spike.