After Price Hike In Commercial LPG And ATF, Government Raises Windfall Tax to Rs 4,600/Tonne- Here's Why Central Govt Levies It

The SAED on diesel exports has been reduced to nil from Rs 1.50 a litre, as per an official notification. However, the levy on petrol and jet fuel or ATF remains unchanged at nil. These new rates came into effect from March 1.
Windfall Tax, Hike, Crude Oil, Petrol, Diesel, Fuel, Government

Government Raises Windfall Tax to Rs 4,600/Tonne- Here's Why Govt Levies It (Image source-iStock)

The government has increased the windfall tax on domestically produced crude oil to Rs 4,600 per tonne from Rs 3,300 per tonne, effective from Friday. This tax is imposed in the form of the Special Additional Excise Duty (SAED).
The SAED on diesel exports has been reduced to nil from Rs 1.50 a litre, as per an official notification. However, the levy on petrol and jet fuel or ATF remains unchanged at nil. These new rates came into effect from March 1.

What Is SAED?

The windfall tax, functioning as the SAED, was first introduced on July 1, 2022. This move aligned India with other nations that tax the supernormal profits of energy companies. The tax rates are subject to fortnightly reviews based on the average oil prices observed in the preceding two weeks.

Volatility in International Crude Oil Prices

The volatility in international crude oil prices is expected to persist. The Organization of the Petroleum Exporting Countries (OPEC) anticipates a robust demand in the oil market in 2024 and 2025. However, international crude oil prices have not seen a significant rise following the Red Sea crisis. On a recent Thursday, Brent crude futures for April were down two cents at $83.66 a barrel. Brent has comfortably hovered above the $80 mark for three weeks, with the Middle East conflict having only a modest impact on crude flows.

Rationale Behind Windfall Tax

Government Revenue Recovery

The windfall tax aims to ensure that companies benefiting from sudden profit increases contribute their fair share to government revenue, especially amid economic challenges.

Encouraging Reinvestment

By imposing the windfall tax, the government encourages companies, particularly in the oil sector, to reinvest their profits.

Addressing Economic Losses

The windfall tax hike is a response to economic losses, and the government seeks to offset these losses by taxing industries that have experienced substantial profit growth.

Targeting Oil Companies

Oil companies have become focal points for windfall taxes due to their substantial profit increases driven by soaring oil prices amid global conflicts. The government’s objective is to lower the prices of certain goods and services, making them more affordable for the general population. While oil companies play a crucial role in contributing to the economy, they are also subject to these taxes to ensure a balanced economic environment.

Government Hikes Prices Of Commercial LPG Gas Cylinders And Jet Fuel or ATF

Earlier today, the government announced a hike in the prices of commercial LPG gas cylinders and jet fuel, effective from March 1. The prices of 19 Kg commercial LPG gas cylinders have been increased by Rs 25 across all metros
Aviation Turbine Fuel (ATF) or jet fuel, have been revised across all metros effective from March 1, 2024. In Delhi and Kolkata, ATF prices for domestic airlines have been increased to Rs 1,01,397/Kl and Rs 1,10,297/Kl respectively
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