The state-level political dynamics behind the windfall tax on fuel exports

Gujarat has the highest percentage of private oil pumps at 24%, followed by Rajasthan at 14.5%; the former will elect a new legislative assembly by this December, the latter, a year later

It is an interesting exercise to view the finance ministry’s recent decision to charge a “windfall tax” on oil companies in the context of state-level political dynamics. 

On July 1 this year, the ministry imposed a cess of Rs 6 per litre on petrol and Rs 13 per litre on diesel exported from India. A notification issued by the ministry stated, “As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market.” Unusually the ministry used the term “windfall gains” to explain why these taxes among a set of