India raises windfall tax on crude oil amid global market volatility

In response to ongoing market fluctuations, the Indian government under Prime Minister Narendra Modi has announced a slight increase in the windfall tax on domestically produced crude oil and diesel.

Effective from February 16, 2024, the special additional excise duty (SAED) on crude oil rises to 3,300 rupees (approximately $40) per tonne, while diesel exports will now incur 1.50 rupees per litre duty.

The recent adjustments mark a marginal uptick from the previous rates, reflecting the government's strategy to capitalise on energy sector profits amid global uncertainties.

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While SAED on petrol and aviation turbine fuel remains untouched, the reintroduction of duty on diesel exports underscores efforts to bolster domestic reserves amidst the Red Sea crisis.

The fortnightly review mechanism, initiated in July 2022, ensures that tax rates align with prevailing oil prices, facilitating timely fiscal adjustments.

The decision comes amidst a backdrop of fluctuating global oil prices.

With Brent crude hovering around $81.97 per barrel and the Indian crude oil basket at $83.08 a barrel as of February 14, market volatility poses challenges and opportunities for oil-dependent economies like India.

Forecasts from the International Energy Agency (IEA) and the Organisation of the Petroleum Exporting Countries (OPEC) paint divergent pictures of the oil market.

While OPEC anticipates robust demand growth in 2024 and 2025, the IEA's revised projections signal a slowdown in global oil demand momentum.