Govt. cuts the windfall tax on crude oil
As part of its fortnightly revision, the Indian government has reduced the windfall tax on crude oil imports from Rs 9,600 to Rs 8,400 per metric tonne (PMT), effective immediately on Wednesday. However, the prices of diesel, petrol, and jet fuel (ATF) have remained the same.
Financial analysts argue that the reduction in the tax, previously known as Special Additional Excise Duty (SAED), points towards the centre’s attempt to counterbalance other internal taxes and ensure fair competition for domestic goods and productions.
However, many independent analysts see the government’s move as a bid to cater to the elite classes – on whom the centre relies heavily for economic and public support.
The term “windfall” refers to a sudden and substantial rise in profits. However, the word “tax” suggests a levy placed on this sudden increase in income. India first imposed a windfall on July 1, 2022, to address the energy product shortage on the domestic market due to the beginning of the Russia-Ukraine war.
In doing so, India had joined the ranks of several other nations, such as the UK, Germany, and others, which had imposed strict windfall taxes on major oil corporations like Shell, BP, ExxonMobil, Chevron, etc. to address the massive profits made during Russia’s invasion of Ukraine.
Govt. windfall tax relief may worsen climate change
In the face of extreme and frequent weather events being witnessed around the world, climate scientists have speculated that the reduction in windfall tax will further worsen climate change. There may now be an increase in the production and consumption trends of major oil corporations, leading to higher GHG (greenhouse gas) emissions.
Generally, big oil and natural gas corporations dislike windfall tax as it lessens their net profit. Instead, they advocate for implementing ‘green investment’ measures for tackling climate change. But even when such measures prove ineffective in stopping the downward spiral of environmental deterioration, corporations seem less and less willing to lower production, citing the growth of the human demographic every year.
The Indian govt, like many others, has started the gradual transition to green energy solutions to meet domestic energy requirements, but the tax relief move is bound to cause long-term consequences in the global run for attaining environmental sustainability.
Experts agree that as long as conflicts rage in Europe and the Middle East, energy corporations will continue to make profits, with or without windfall tax.
