Government Reduces Crude Oil Tax, Eliminates Diesel and ATF Levies

India has reduced the windfall tax on petroleum crude oil to Rs 2,100 per metric tonne, effective August 17, down from Rs 4,600 per tonne. This adjustment follows a previous reduction of 34.2 percent to Rs 4,600 on July 31. The government has also eliminated the windfall tax on the export of diesel and aviation turbine fuel (ATF).

Introduced in July 2022, the windfall tax aimed to address the preference of private refiners to sell fuel internationally for better margins, rather than selling domestically. The tax is revised bi-weekly based on international crude and product price fluctuations.

Global Crude Oil Prices

Oil prices experienced a decline of approximately 2 percent on Friday, with Brent crude trading just below $80 per barrel. Brent crude futures fell by $1.06, or 1.3 percent, to $79.98 per barrel, while US West Texas Intermediate crude futures decreased by $1.22, or 1.6 percent, to $76.94 per barrel. The previous week’s closing prices were $79.66 for Brent and $76.84 for WTI.

Factors Affecting Oil Prices

China’s Economic Slowdown: Recent economic data from China indicates a slowdown, with new home prices dropping at the fastest rate in nine years, industrial output decreasing, and unemployment rising. This has led to concerns about reduced demand from China, the world’s largest oil importer, and refineries in China reducing crude processing rates due to weak fuel demand.

US Economic Data: Conversely, positive data from the US, including stronger-than-expected retail sales and lower new jobless claims, has provided some support for oil prices. This has renewed optimism about economic growth in the world’s largest oil market.