Scrapping Windfall Tax, Boosting Exploration Policy Expands Domestic Oil, Gas Output: S&P

India is making bold strides to rejuvenate its upstream energy sector, aiming to attract both private and foreign investments through significant policy reforms. The recent passage of the Oilfields (Regulation and Development) Amendment Bill, 2024, in the Rajya Sabha marks a pivotal shift in the nation’s approach to energy exploration. This legislative update broadens the definition of “mineral oils” to encompass shale oil, shale gas, and coal bed methane, thereby expanding the spectrum of exploitable resources.

Complementing this legislative change, the government has abolished the windfall tax on domestically produced crude oil and fuel exports. This tax, introduced in July 2022 amid surging global crude prices, was designed to capture extraordinary profits from producers. Its removal is anticipated to alleviate financial burdens on oil producers and stimulate increased production.

Rahul Chauhan, upstream technical research country lead at S&P Global Commodity Insights, remarked, “The objective of the changes to the Oilfields Act is to create a more investor-friendly environment and enhance the global competitiveness of future oilfield contracts by addressing long-standing concerns of exploration companies.”

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These reforms are poised to invigorate India’s energy landscape, reducing its heavy reliance on imports, which currently account for over 80% of the country’s crude oil requirements. By fostering a more conducive environment for exploration and production, India aims to harness its domestic resources more effectively, ensuring energy security and economic growth.