The Indian government has increased the taxes for several petroleum products, including aviation turbine fuel (ATF), in order to benefit from windfall profits currently being experienced by oil companies in the country.
The windfall tax on ATF was raised from INR1.5 ($0.018) to INR4.5 ($0.054) per liter, while also raising the duty on crude oil from INR1,700 ($20.52) to INR2,100 ($25.34) per ton, according to a document from the Central Board of Indirect Taxes & Customs (CBIC), published on the Gazette of India. The CBIC previously reduced the windfall tax of ATF to INR1.5 ($0.018) effective December 16, 2022, as oil prices declined globally.
India introduced windfall profit taxes on July 1, 2022, initially pricing the levy at INR6 ($0.072) per liter of ATF. The taxes are reviewed every two weeks and change depending on the price of crude oil.
The local government sought to impose the taxes once local refiners began to look for overseas markets to sell their products. The country has been importing oil from Russia well below the $60 per barrel price cap imposed by Western states in a bid to limit profit that could be used to fund the country’s invasion of Ukraine.
“We are happy that exports are happening. We are happy that companies are making profits. We are happy that exports are giving them (companies) that kind of returns on what they invested, which is so required for anybody who makes those investments. But these are extraordinary times,” stated Nirmala Siharaman, the Indian Minister of Finance on July 1, 2022, the day the tax was imposed.
In September 2022, the European Union (EU) agreed to a similar measure to home in on the profits of energy firms.
“The era of cheap fossil fuels is over. And the faster we move to cheap, clean, and homegrown renewables, the sooner we will be immune to Russia’s energy blackmail,” stated Frans Timmermans, the European Commission’s (EC) Vice President during a speech on September 14, 2022.
Ro Khanna, a Democrat from California, also introduced a similar bill in the United States in November 2022. However, it has been stuck at the House of Representatives Committee and Means, the chief tax-writing committee in that chamber of legislators.
