India has reduced all windfall taxes on crude oil from 3,500 rupees (USD 42.56) per tonne as of Tuesday, a government notification read. The windfall tax on diesel was decreased from Rs 1 per litre to Rs 0.50. As of April 4th, solely diesel carries a windfall tax while crude, Aviation Turbine Fuel (ATF) and petrol will not attract any such levies.

In July, India slapped a windfall tax on crude oil producers and charges on the export of petrol, diesel and aviation fuel in response to private refiners' desire to profit from high refining margins in foreign markets rather than domestic markets.

Crude oil is refined and transformed into fuels like gasoline, diesel, and aircraft turbine fuel after being extracted from the earth and from the seabed. Every two weeks, the tax rates are adjusted based on the two-week average of oil prices.

The country's main fuel exporters are Reliance Industries Ltd., which runs the largest single-location oil refinery complex in the world in Jamnagar in Gujarat, and Nayara Energy, which is supported by Rosneft.

On July 1 of last year, India enacted its first windfall profit tax, joining an increasing number of countries that tax energy companies' higher-than-average profits. The export taxes at the time were Rs 6 per litre (USD 12 per barrel) for petrol and ATF and Rs 13 per litre (USD 26 per barrel) for diesel. The initial review eliminated the export tax on fuel, and the most recent review on March 4 eliminated the export duty on ATF.

The government imposes tax on oil producers' unforeseen gains on any price they receive that is more than a cap of USD 75 per barrel. The tax on petroleum exports is calculated based on the margins or cracks that refiners make from international shipments. These margins are largely the difference between the cost and the realised international oil price.

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