India Cuts Windfall Tax on Crude Oil Amid Global Market Shifts

India reduces windfall tax on petroleum crude to Rs 2,100 per metric ton amid declining oil prices and a slowdown in China's economy. The tax remains zero for diesel, petrol, and aviation turbine fuel.

In a move reflecting global market dynamics, India announced a reduction in the windfall tax on petroleum crude to Rs 2,100 per metric ton, down from Rs 4,600 per ton. The revised tax rate becomes effective starting Saturday, August 17, 2024, as per an official gazette notification.

This tax adjustment comes in the wake of a roughly two per cent dip in oil prices, with Brent crude futures closing at USD 78.37 per barrel in international markets. The downturn is largely attributed to the slowing Chinese economy, which has faced significant challenges, including the sharpest drop in new home prices in nine years over July.

Global traders are increasingly concerned about dwindling demand from major oil importers. The Organization of the Petroleum Exporting Countries (OPEC) recently lowered its global crude oil demand forecast for 2024 to approximately 135,000 barrels per day, citing weaker consumption from China. Meanwhile, the windfall tax on diesel, petrol, and aviation turbine fuel will stay at zero, with the tax reviewed biweekly.

India initially imposed the windfall tax on crude oil producers and fuel exports in July 2022. The move aimed to control private refiners who were prioritizing overseas sales to capitalize on higher refining margins rather than catering to local demand.