Why India has cut windfall tax on diesel, aviation fuel exports

The Indian government has removed the recently imposed cesses and levies on diesel and aviation turbine fuel, and the cess on exports of petrol.

Context

The Indian government has removed the recently imposed cesses and levies on diesel and aviation turbine fuel, and the cess on exports of petrol. 

What is windfall tax?

• A windfall tax is a higher tax rate on sudden big profits levied on a particular company or industry.
• In simpler terms, it is a one-off tax imposed by a government on a company.

What are the duty cuts?

• Additional excise duties equal to Rs 6 per litre on exports of petrol have been removed, while that on diesel exports has been cut to Rs 11 per litre from Rs 13 per litre earlier. 
• Also, the cess by way of special additional excise duty (or windfall tax) on domestic crude being sold to domestic refineries at international parity prices has been cut to Rs 17,000 per tonne from Rs 23,250 per tonne, while the export duty on ATF has been lowered by Rs 2 to Rs 4 per litre.
• The government has also exempted petrol, diesel and ATF from levy of duties when exported from refinery units located in Special Economic Zones.

What was the reason for the extra levies?

• With an aim to address the issue of fuel shortage in the country, the government had on July 1 imposed special additional excise duty on export of petrol and diesel. 
• Cesses equal to Rs 6 per litre on petrol and Rs 13 per litre on diesel were imposed on their exports.
• The government also imposed a cess of Rs 23,250 per tonne (by way of special additional excise duty) or windfall tax on domestic crude being sold to domestic refineries at international parity prices.