Profit

Center cuts windfall tax on domestic crude oil

The government on Friday reduced the windfall tax on locally produced crude oil in line with a drop in international rates, and cut the export tax on diesel and jet fuel (ATF).

In the fifth bi-monthly review, the government reduced the tax on locally produced crude oil to Rs 10,500 per ton from Rs 13,300 per ton.

The diesel export levy has been reduced to Rs 10 per liter from Rs 13.5. In addition, the export tax on aviation turbine fuel (ATF) has been reduced from Rs 9 to Rs 5 per liter with effect from September 17, according to a notification from the Ministry of Finance issued late Friday evening.

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International oil prices fell this month to their lowest level in six months, prompting a windfall tax cut.

The basket of crude oil that India buys averaged $92.67 a barrel in September from $97.40 the previous month.

While private refiners Reliance Industries Ltd and Rosneft-based Nayara Energy are major exporters of fuels such as diesel and ATF, the one-off domestic crude oil tax targets producers such as state-owned Oil and Natural. Gas Corporation (ONGC) and Vedanta Ltd.

India imposed windfall taxes for the first time on July 1, joining a growing number of countries that tax the super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins for oil producers and refiners.

Export duties of 6 rupees per liter ($12 per barrel) were levied on gasoline and jet fuel and 13 rupees per liter ($26 per barrel) on diesel.

A windfall tax of Rs 23,250 per tonne ($40 per barrel) on domestic crude production was also levied.

Duties were partially adjusted in the previous four cycles on July 20, August 2, August 19 and September 1, and were waived for gasoline.