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This will immediately bring bring relief to oil conglomerates such as Reliance and ONGC, with their gross refining margins getting a lift, according to an Economic Times report.

This came about after a detailed review by the Prime Minister’s Office (PMO), the Revenue Department, and the Petroleum Ministry, which also ended in the withdrawal of the Road and Infrastructure Cess (RIC) on exports of petrol and diesel.

What is windfall tax?

Windfall tax is a special tax on domestic crude oil production which aims to capture revenue from the windfall gains of oil producers.

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It was introduced in July 2022 due to the Russia-Ukraine war and the West’s sanctions on Russia which led to a surge in crude oil prices, resulting in unprecedented and huge one-time profits for oil companies.

India was not alone in this. Several other nations also ended up imposing such type of a tax to generate extra revenue for the government.

However, it was also controversial with industry players arguing that it hurt their profitability and also disincentivised production.

The abolishing of the tax comes after the government announced in September that it would scrap windfall tax on crude oil, but from ₹1,850 per tonne in August.

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The tax in itself had also become less effective in recent months as global crude oil prices slowly declined, reducing the revenue generated.

It also eliminated windfall tax collection on the export of diesel and aviation turbine fuel.