The Indian government has increased the windfall profit tax on diesel exports to Rs 13.5 per litre and jet fuel exports to Rs 9 per litre, in addition to hiking the duty on domestically produced crude oil to keep pace with global price increases. The government increased the windfall profit tax on diesel exports to Rs 13.5 per litre from Rs 7 per litre.

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According to a finance ministry notification released late Wednesday night, the duty on Aviation Turbine Fuel (ATF) exports has also been raised to Rs 9 per litre from Rs 2 per litre, with effect from September 1. In addition, the tax on domestically produced crude oil has been raised from Rs 13,000 to Rs 13,300 per tonne.

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The tax on exports was raised as margins improved, while the tax on domestically produced oil was raised marginally in response to marginal changes in international oil prices and expectations of a price increase due to the Organization of the Petroleum Exporting Countries (OPEC) and its allies cutting production.

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Windfall taxes are levied by the government on specific industries that achieve above-average profits as a result of economic circumstances. Windfall taxes are generally aimed at corporations in a certain industry that benefits the most economically from windfalls.

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On July 1, India imposed its first windfall profit tax, joining an increasing number of countries that tax energy companies’ higher-than-average profits. However, worldwide oil prices have subsequently fallen, diminishing profit margins for both oil producers and refiners.

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On July 1, export tariffs of Rs 6 per litre (USD 12 per barrel) on petrol and ATF and Rs 13 per litre on diesel were imposed (USD 26 a barrel). A windfall profit tax of Rs 23,250 per tonne on domestic crude production (USD 40 per barrel) was also imposed.

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After that, on July 20, the Rs 6 per litre export duty on petrol was removed, and the Rs 13 and Rs 6 export taxes on diesel and jet fuel (ATF), respectively, were each reduced by Rs 2. The tariff on domestic crude was also reduced to Rs 17,000 per tonne.

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Following a decline in refinery cracks or margins, the export tax on diesel was reduced to Rs 5 per litre on August 2 and the duty on ATF was scrapped. However, the levy on domestically produced crude oil was increased to Rs 17,750 per tonne to reflect a marginal rise in global crude prices.

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The export duty on diesel was raised to Rs 7 per litre on August 19, while the ATF tax was reinstated at Rs 2 per litre. The tax on domestic crude oil production was decreased to Rs 13,300 per tonne in line with the decline in crude oil prices.