Govt cuts windfall tax on crude oil, ATF, export of diesel
1 min read 16 Feb 2023, 07:56 AM ISTThe new tax rates came into effect from 16 FebruaryThe levy is reviewed every fortnight and rates are moderated based on international oil prices
PremiumThe Central government on Thursday slashed windfall profit tax levied on domestically-produced crude oil, as well as on the export of diesel and aviation turbine fuel (ATF), in line with firming international oil prices, according to an official order.
The levy on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) has been cut to ₹4,350 per tonne from ₹5,050 per tonne, the order read.
The government has also trimmed the tax on export of diesel to ₹2.50 per litre from ₹7.5 a litre. Petrol continues to have nil special additional excise duty.
Meanwhile, the tax on overseas shipments of ATF has been cut to ₹1.50 per litre from ₹6 a litre.
The new tax rates came into effect from 16 February.
Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels such as petrol, diesel and ATF.
India first imposed windfall profit taxes on 1 July, 2022, joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of ₹6 per litre ($12 per barrel) each were levied on petrol and ATF, and ₹13 a litre ($26 a barrel) on diesel.
The levy is reviewed every fortnight and rates are moderated based on international oil prices.
Reliance Industries Ltd, which operates the world's largest single-location oil refinery complex in Gujarat's Jamnagar, and Rosneft-backed Nayara Energy are primary exporters of fuel in the country.
The cuts came as refiners continued to stock up discounted Russian fuel amid a steady increase in domestic consumption.
The windfall taxes had been weighing on profits of refiners and explorers, with companies like Reliance Industries, Vedanta Ltd, Oil India and Mangalore Refinery and Petrochemicals Ltd.
The government levies tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel.
The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.
