Government increases windfall tax on crude oil, ONGC & OIL bracing for impact

New Delhi: In a recent move, the government has opted to heighten the windfall tax imposed on crude oil, significantly impacting upstream oil entities like ONGC and Oil India Ltd (OIL). The tax on petroleum crude oil has surged to Rs 2,300 ($27.63) per tonne from its previous Rs 1,300, as per the latest official notification.

This elevation in the windfall tax implies that ONGC and OIL may not entirely benefit from the escalating international prices of crude, leading to potential losses for these companies.

Nonetheless, the government's decision serves to bolster its fiscal resources, aiding in the management and containment of the fiscal deficit.

Conversely, a noteworthy change in the government's tax strategy involves the elimination of the Rs 0.5 per litre tax previously imposed on diesel and aviation fuel.

This move follows the government's initial imposition of the windfall tax on crude oil in July of the previous year. The tax extension to gasoline, diesel, and aviation fuel exports was prompted by private refiners capitalizing on robust overseas refining margins instead of catering to the domestic market.