India has implemented a new windfall gains tax on petrol exports and adjusted levies on diesel and aviation turbine fuel, effective May 16, in a strategic move to bolster domestic fuel availability and manage global price volatility exacerbated by the ongoing West Asia crisis.
Image used for representation purpose only.Photograph: ANI Photo
Key Points
- A new windfall gains tax of Rs 3 per litre has been imposed on petrol exports, marking the first such levy since the start of the West Asia crisis.
- The levy on diesel exports has been reduced to Rs 16.5 per litre from Rs 23 per litre, and on aviation turbine fuel (ATF) to Rs 16 per litre from Rs 33 per litre.
- The road and infrastructure cess will be nil on exports of both petrol and diesel, with no change in existing duty rates for domestic consumption.
- The windfall tax aims to increase domestic availability of fuel and prevent exporters from exploiting global price differences, particularly due to the West Asia crisis.
- Crude oil prices have remained above USD 100 per barrel recently, significantly higher than before the conflict, influencing these tax adjustments.
The government on Friday imposed a windfall gains tax of Rs 3/litre on the export of petrol, while reducing the levy on diesel to Rs 16.5/litre and aviation turbine fuel to Rs 16/litre effective May 16.
The Finance Ministry, in a notification, said that the road and infrastructure cess will be nil on exports of petrol and diesel.
Impact on Domestic Fuel Prices and Exports
Also, there is no change in the existing duty rates on petrol and diesel cleared for domestic consumption.
The special additional excise duty (SAED) on petrol at Rs 3/litre has been imposed for the first time since the start of the West Asia crisis.
The duty on export of diesel has been reduced to Rs 16.5 per litre, from Rs 23 per litre, and aviation turbine fuel to Rs 16 per litre from Rs 33 per litre.
Historical Context of Levies
The government, on March 26, imposed an export duty on diesel at Rs 21.50 a litre, and on ATF at Rs 29.5 a litre. In the review on April 11, the duties were hiked to Rs 55.5/litre and Rs 42/litre.
In the April 30 review, the duties were cut to Rs 23/litre and Rs 33/litre.
The windfall tax was levied to increase domestic availability of the fuel amid the US-Israel and Iran war.
They were also aimed at restraining exporters from taking undue advantage due to price differences, as globally crude oil prices had risen since the beginning of the war.
Global Oil Market Dynamics
On February 28, the United States and Israel launched military strikes against Iran, triggering sweeping retaliation from Tehran.
Crude oil prices have remained above USD 100 per barrel over the past week, from about $73 per barrel before the war.
The windfall tax was to ensure domestic availability of petroleum products by disincentivising exports in the backdrop of the West Asia crises, the ministry said.
