Finance Ministry to decide on scrapping windfall tax as crude prices decline, says PM's advisor
New Delhi: The Union finance ministry is expected to decide on scrapping the windfall tax on crude oil, as falling prices have made the levy less relevant, said Prime Minister’s advisor Tarun Kapoor, media reports said.
Kapoor revealed that the Union petroleum and natural gas ministry has already written to the finance ministry seeking the withdrawal of the tax, reported Mint.
"I think the petroleum ministry has written to the finance ministry. Anyway, there is not much relevance in it (windfall tax) now," Kapoor was quoted as saying by Mint.
Kapoor said this on the sidelines of the World Biogas Association India Congress 2024 on Wednesday.
The windfall tax on domestically produced crude oil was introduced in 2022 after the Russia-Ukraine conflict led to a sharp increase in oil prices, resulting in windfall profits for oil and gas companies.
This tax is levied as a special additional excise duty and is adjusted every fortnight based on the average oil prices over two weeks.
Since September 18, the windfall tax on domestically produced crude oil has been set at zero, with the tax on the export of diesel and aviation turbine fuel also reduced to zero.
Crude oil prices have remained relatively subdued despite ongoing volatility in the market due to the conflict in West Asia.
On Wednesday, the December Brent crude oil contract on the Intercontinental Exchange was trading at $75.63 per barrel, 0.54% lower than its previous close, the report said.
Union minister for petroleum and natural gas Hardeep Singh Puri also commented on the oil market, noting on Tuesday that global oil prices may decline as there is no shortage of oil.
According to the report, he said, "I think [oil prices] should come down. It depends on global factors. One thing is very clear – there is no shortage of oil in the world. They were producing some 102 million barrels per day earlier, then some voluntary cuts took place."
In its October oil market report, the International Energy Agency (IEA) stated that global oil demand is projected to grow by just under 900,000 barrels per day (kb/d) in 2024 and close to 1 million barrels per day (mb/d) in 2025, marking a significant slowdown compared to the 2 mb/d growth seen during the 2022-2023 post-pandemic period.
The report also noted that China's contribution to global demand growth is expected to decrease, accounting for 20% of the gains in 2024 and 2025, compared to almost 70% in 2023.
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