"A response to a dynamic situation": Oil ministry gives its view on windfall tax

Amid the heated ongoing debate around windfall profit tax, the government said on Tuesday that the levy was a "response to a dynamic situation and its design provides for recalibration based on market inputs and feedback."

The statement came on reports citing the ministry's August 12 letter to the finance ministry seeking a review of the windfall profit tax on domestically produced crude oil.

"Crude oil prices have witnessed extreme volatility in 2022. This has resulted in very high prices for end consumers at petrol pumps. Countries around the world have implemented various measures to mitigate the adverse impacts on consumers. 'Windfall tax' is one of the measures which helps in dealing with the situation," the oil ministry said in a statement.

India first imposed windfall profit tax on July 1, joining a growing number of nations that tax super normal profits of energy companies.

While duties were slapped on the export of petrol, diesel and jet fuel (ATF), a Special Additional Excise Duty (SAED) was levied on locally produced crude oil.

"The extent of its applicability, reference period, amount of cess/ tax/ duty, the incidence of tax liability, a mechanism for review are integral to such a tax," the oil ministry said.

In the August 12 letter mentioned above, the finance ministry sought exemption from the new levy for fields or blocks that were bid out to companies under Production Sharing Contract (PSC) and Revenue Sharing Contract (RSC).