Engaged with FinMin over review of windfall tax: Petroleum Secretary

Petrol, diesel pump prices may be reduced by OMCs if global crude oil prices remain low

The Ministry of Petroleum and Natural Gas is currently in discussions with the finance ministry for a review of the windfall tax, Petroleum Secretary Pankaj Jain said here on Thursday. He also said that oil marketing companies (OMCs) will consider a cut in pump prices of petrol and diesel if global crude oil rates remain low for an extended period.

Classified as Special Additional Excise Duty (SAED), windfall tax is levied on domestically produced crude oil, and export of diesel, petrol, and aviation turbine fuel (ATF). The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks. As on August 30, the windfall tax on domestically produced crude oil was reduced to Rs 1,850 per tonne, from Rs 2,100 per tonne earlier. The tax has climbed down from Rs 7,000 per tonne in July-end. The windfall tax on diesel and aviation turbine fuel (ATF) exports remains unchanged at zero.

Speaking on the sidelines of the International Conference on Green Hydrogen, Jain said the recent fall in global crude prices has necessitated the review of the windfall tax, in order to provide relief to OMCs.

"There is a calculation mechanism for that... We are in continuous discussions with the revenue department, which will take a final call," he said. Jain expects “no windfall tax” on refined fuels in the short term if product cracks stay low.

On retail fuel prices, Jain said the ministry is analysing the fall in global prices, and studying for how long it may remain low. "It would not be appropriate to cut (retail prices) by following the developments in just a week. We need time to analyse this trend for a longer duration," Jain said.

Global crude prices have fallen every month since April, when it had breached the $90 per barrel (bbl) level. Earlier this week, benchmark Brent crude futures prices fell to a 33-month low of $69/bbl over weak demand and concerns of oversupply. On Thursday, Brent crude futures stood at $71.3/bbl.

Global prices may be impacted in the short term as Opec (Organization of the Petroleum Exporting Countries) is set to take a call on the ongoing 2.2 million barrels per day (b/d) production cuts by member nations in December. Another set of cuts totalling 1.65 million b/d announced in April 2023 has been extended until the end of 2025.

Jain said India wants the production to rise as there is demand, and will welcome a production increase.