The Centre has cut the windfall tax on domestically produced crude oil to Rs 10,500 from Rs 13,300 per tonne in line with the fall in the global prices and also reduced the levy on the export of diesel and jet fuel (ATF). The levy on the export of diesel was reduced to Rs 6.50 per litre from Rs 13.50.

The tax on aviation turbine fuel (ATF) exports was cut to Rs 8.5 a litre from Rs 9 per litre with effect from September 17, according to a finance ministry notification. International oil prices have fallen to a six-month low this month, leading to a reduction in the windfall profit tax.

The basket of crude oil that India buys has averaged $92.67 per barrel in September against $97.40 in the previous month. At the time of imposing the windfall tax, the government had stated that the objective behind the move was to shore up domestic supplies as refiners were preferring to export than to meet the local requirements.

While private refiners Reliance Industries and Rosneft-based Nayara Energy are the principal exporters of fuels such as diesel and ATF, the windfall levy on domestic crude targets producers such as state-owned Oil and Natural Gas Corporation and Vedanta. Industry sources said the government needs to come out with formula or bring transparency in calculating the windfall tax.

The current methodology seems to be arbitrary and brings in an element of uncertainty. India first imposed windfall profit taxes on July 1.