Profit

Reduced windfall tax on domestic crude oil, diesel; scrapped for ATF as of today

The government, in the sixth bi-monthly review, reduced a windfall tax on locally produced crude oil to 8,000 rupees per tonne from 10,500 rupees per tonne from Sunday, after a drop in global oil prices.

The government has also scrapped an export tax on jet fuel and halved export duty on diesel to Rs 5 per liter from Sunday, a government notification said.

The cut was in line with a cut in international rates and removed the jet fuel export tax effective today, according to a Finance Ministry notification issued late Saturday night.

The reduction in tax rates follows the drop in crude oil prices on international markets. India imposed a windfall tax on oil producers in July as the industry made abnormal profits due to a surge in global crude prices.

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

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 per liter ($12 per barrel) was levied on gasoline and ATF and 13 per liter (26 USD per barrel) of diesel.

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

Duties were partially adjusted in the previous five rounds on July 20, August 2, August 19, September 1 and September 16 and were waived for gasoline.

FM Nirmala Sitharaman on exceptional tax

Finance Minister Nirmala Sitharaman said last month that the one-off tax on petroleum products, crude is not ad hoc but is charged in regular consultation with industry.

Addressing an online event, the minister said it was unfair to call the windfall tax as ad hoc as the tax rate and its reset are done in full consultation with industry .

“The very idea was implemented after giving the industry full confidence,” she said at a reception hosted by Elara Capital.

“When we suggested the idea, we told the industry that the tax rate would be revised every 15 days and we did,” Sitharaman said.

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