E-Paper
Windfall profit tax on domestic crude, exports of diesel, jet fuel raised
After reviewing global oil prices and margins of Indian petroleum refining companies, the government raised the levy on exports of diesel from ₹7 a litre to ₹13.50
The government has raised the windfall profit tax on domestically produced crude oil by ₹300 to ₹13,300 per tonne after a fourth fortnightly review. It also increased the levies on exports of diesel and aviation turbine fuel (ATF) to ₹13.50 per tonne and ₹9 a litre, an official notification said.
After reviewing global oil prices and margins of Indian petroleum refining companies the government raised the levy on exports of diesel from ₹7 a litre to ₹13.50. Exports of ATF will now attract ₹9 per litre windfall tax instead of ₹2 per litre that prevailed till August 31, according to the Union finance ministry’s order issued late Wednesday night.
A finance ministry official said the windfall tax on domestically produced crude oil is based on an abnormal hike in its rate in the international market. Indian oil producers align domestically-produced crude oil rates as per the movement of international benchmarks. The levy on exports of petroleum products such as diesel and ATF depends on the refiners’ profit margins.
Benchmark Brent crude, which fell below $95 a barrel on August 4 and touched a low of $92.34 mid-month, bounced back to above the $100-mark last week.
India imports 85% of its crude oil requirements. The daily average import cost was $102.04 a barrel on August 30, an 11.58% jump since August 17 ($91.45). International oil prices are moving north amid the likelihood of production cut by the producers’ cartel Organisation of the Petroleum Exporting Countries.
Rising fuel prices are a concern for the finance ministry and Reserve Bank of India as they have a spiralling impact on India’s inflation. After hitting a peak of 7.8% in April, India’s retail inflation – measured by the consumer price index – gradually moderated to 6.71% in July, but still remains high from the official upper tolerance limit of 6%.
The Centre on July 1 imposed a windfall tax on exports by oil refiners and producers, announcing levies of ₹6 per litre on petrol and ATF, ₹13 on every litre of diesel, and ₹23,250 on every tonne of domestically produced crude oil in a decision aimed at increasing local supplies and boosting its revenues.
HT on May 27 reported that India was considering a windfall tax on petroleum products to offset the ballooning public expenditure on fuel, food, and fertiliser subsidies amid skyrocketing inflation.
After reviewing the market situation on July 20, the government removed the ₹6 a litre export duty on petrol and reduced the tax on exports of diesel and ATF by ₹2 per litre each to ₹11 and ₹4. Even windfall tax on domestically produced crude was also slashed to ₹17,000 per tonne.
Following a second review on August 2, the export tax on diesel was cut to ₹5 a litre and on ATF to nil. The windfall tax on crude was raised to ₹17,750 per tonne.
The government reduced the windfall tax on domestically produced crude oil by about 27% at ₹13,000 per tonne as international oil prices eased after the third review on August 19. It reimposed a ₹2 per litre export duty on ATF and raised the duty on diesel from ₹5 a litre to ₹7 due to the export surge.
