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India’s government this week slashed the windfall tax on domestically-produced crude oil to zero, effective May 16, according to a government notification cited by Reuters.
In July last year, India slapped a windfall tax on the country’s oil producers and oil refiners who were exporting more due to the high international price of crude oil and refined products. The new taxes were aimed to serve as an incentive to keep more product at home and export less.
“As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market,” a government-issued statement said at the time.
India reviewed tax rates on crude oil and fuels every two weeks, based on the average oil prices in the past two weeks.
In the latest windfall tax change this week, the government left the windfall tax on gasoline, diesel, and aviation turbine fuel (ATF) unchanged at zero.
Meanwhile, fuel demand in India eased in April compared to the highs seen in February and March.
India’s fuel demand jumped by 5% in March compared to a year earlier, as the world’s third-largest crude oil importer continued to see consumption growing. In February, Indian fuel demand was estimated to have jumped to the highest level in at least 24 years, and refiners in India raised crude throughput by 2% in February compared to January.
In April, fuel consumption fell by 10% from March, but sales of diesel – the most widely used fuel in India and the engine of economic growth – jumped to the highest level in government data going back to 1998.
Fuel consumption in India is expected to rise by 4.7% in the fiscal year between April 2023 and March 2024, estimates by the Indian Ministry of Petroleum and natural gas showed earlier this year. India's gasoline demand is forecast to increase by 7.1% over the next fiscal year, while gasoil demand is expected to rise by 4.2%, according to the projections.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com