In a recent move, the Finance Ministry has decided to abolish the windfall tax, officially known as Special Additional Excise Duty (SAED), that was imposed in July 2022 on aviation turbine fuel (ATF), crude products, petrol, and diesel. This tax was introduced during a time when global crude oil prices surged due to the conflict between Russia and Ukraine, aiming to capture the excessive profits earned by oil producers and exporters and generate significant revenue for the government, especially during the pandemic.
The revenue collected from the windfall tax saw a significant decrease over the years, with ₹25,000 crore in FY23, followed by ₹13,000 crore in FY24, and a notable drop to ₹6,000 crore in FY25, underlining its necessity primarily during the COVID period. As crude oil prices stabilized at $70-$75 per barrel, well below their previous peaks, the rationale for maintaining the tax became less compelling. This move is expected to benefit major oil producers like Reliance Industries and ONGC by improving their refining margins, with Reliance’s stock already showing positive market response, reaching ₹1,300.05 per share post-announcement.
Additionally, the government has also removed the Road and Infrastructure Cess (RIC) on the export of petrol and diesel, completing the rollback of levies on fuel exports. This decision is part of the broader shift in India’s fiscal policy landscape, focusing on adapting to changing market dynamics while supporting local industries and consumer demands. The elimination of the windfall tax may lead to reduced operational costs for airlines, potentially lowering airfares, and could prompt oil companies to consider reducing prices of petrol, diesel, and ATF, offering some relief to consumers amidst inflation concerns.