What is the windfall tax?
A windfall tax is a levy imposed on domestic crude oil producers and exporters of petroleum products when the global oil prices or refining margins rise above a certain threshold. The tax is aimed at capturing the excess profits of the energy companies and discouraging exports of fuel.
What are the changes in the tax rates?
The government has notified that the windfall tax on crude oil has been increased from Rs 1,300 to Rs 2,300 per tonne, effective from January 2, 2024. This is a sharp hike of Rs 1,000 per tonne, reflecting the high oil prices in the international market.
On the other hand, the government has abolished the windfall tax on diesel and aviation turbine fuel (ATF), which were previously set at 50 paise and one rupee per litre, respectively. This is a relief for the consumers and the aviation sector, which have been facing high fuel costs.
The windfall tax on petrol remains unchanged at zero, as the government has not imposed any levy on this fuel since July 2022.
How does this affect consumers?
The changes in the windfall tax will have different impacts on different consumers, depending on their fuel consumption patterns. For diesel users, such as farmers, truckers, and bus operators, the removal of the windfall tax will lower their fuel expenses and increase their profitability. For ATF users, such as airlines and passengers, the elimination of the windfall tax will reduce their operational costs and fares, and boost their demand. For petrol users, such as car owners and bikers, the absence of the windfall tax will not affect their fuel prices, which are determined by other factors such as excise duty, VAT, and dealer commission.
The government has also taken into account the environmental impact of fossil fuels and has promoted cleaner alternatives such as electric vehicles and biofuels.