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The fall in the crude oil prices as well as the refining margin for diesel, petrol and aviation turbine fuel, raises the question whether the Indian government should continue with its windfall tax, said CLSA Ltd in a report.

The last two weeks have seen a massive crash in the refining spreads of diesel, gasoline and aviation fuel coinciding with a cool-off in crude prices from their respective peaks seen in June, the report said.

Given this situation, CLSA wondered whether there is a need for the continuation of the windfall tax imposed about two weeks back.

Post windfall tax, the realised spread on diesel and gasoline has fallen to near loss-making levels while the realisation on aviation fuel and crude have also gone below 15-year averages, CLSA said.

The CLSA expects the government to relook at the windfall tax in its fortnightly reviews.

Any relaxation would be a big trigger for ONGC and Oil India and a relief for Reliance Industries, the report added.

Early this month, the Indian government announced the levy of additional excise duty/cess of Rs 6/litre on petrol and Rs 13/litre on diesel exports.

The government also announced the levy of additional excise duty/cess of Rs 23,250/tonne on crude oil as special additional excise duty, since domestic crude producers sell to domestic refineries at international parity prices, and as a result, are making windfall gains.

Similarly in the case of aviation turbine fuel (ATF) exports, a special additional excise duty of Rs 6/litre was announced.

While crude prices have increased sharply in recent months, the prices of diesel and petrol have shown a sharper increase, the government had said.

The government also said the tax will be reviewed every 15 days.

The decline in global prices may force a rethink of this tax if not now but in the subsequent reviews, CLSA said.

"If this tax remains for long, we fear it may hamper the positioning of this government as an export and manufacturing friendly regime," the report noted.