Finance Ministry Considering Scrapping Windfall Tax on Crude: Govt Official

The Finance Ministry is set to review the potential removal of the windfall tax on domestic crude oil production, as revealed by Tarun Kapoor, an advisor to Prime Minister Narendra Modi, on October 23, 2024. This tax was initially implemented in 2022 to curb the excessive profits made by oil producers during a period of soaring global prices.

Key Insights:

Windfall Tax Overview: Introduced on July 1, 2022, the tax aimed to target refiners exporting fuel while domestic supplies were compromised, during a period of volatile global oil prices.

Current Review: Kapoor mentioned that since global oil prices have softened, the Petroleum Ministry has already requested the Finance Ministry to reconsider its necessity.

Rationale for the Tax: It was introduced to regulate “phenomenal profits” made by oil refiners exporting fuel and to ensure the availability of fuel for domestic consumption.

As oil prices stabilize globally, there is a growing view that the windfall tax may no longer be required to balance the market or address domestic fuel supplies.

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