The central government on Tuesday has raised the windfall tax on crude petroleum producers by 4.41 per cent, scrapped the Rs 4 per litre levy on Aviation Turbine Fuel (ATF) exports, and reduced the cess on the export of diesel from Rs 11 to Rs 5 a litre. The union government has also raised the windfall tax on the sale of locally produced crude oil to Rs 17,750 per tonne. For the past two weeks, the sale of crude oil produced in India attracted an additional duty of Rs 17,000 per tonne.
The recent revisions come in the wake of reports which suggested that the Centre was considering lowering the recently implemented windfall tax as profits of fuel exporters and oil producers are dwindling.
A windfall tax is a one-off tax imposed by a government on a company. It is levied on an unforeseen or unexpectedly large profit, especially unfairly obtained. Now, international crude prices have risen sharply in recent months. The domestic crude producers sell crude to domestic refineries at international parity prices. As a result, domestic crude producers are making windfall gains.
The levy, aimed at reining in windfall profits for domestic oil producers who sell their output at international parity prices even to domestic refineries, was Rs 23,250 a tonne between July 1 and July 19.
Export of petrol would continue without the levy of the windfall tax. The new rates are effective from midnight of August 2.
On July 1, Centre imposed an export duty of Rs 6 per litre on petrol and ATF and a Rs 13 a litre duty on export of diesel. A windfall tax of Rs 23,250 per tonne was imposed on the sale of domestic crude.
The taxes were first reviewed on 20 July, wherein the Rs 6 per litre duty on petrol exports was scrapped and the tax on the export of diesel and jet fuel (ATF) was reduced Rs 11 and Rs 4 respectively.
The tax on domestically produced crude was also cut to Rs 17,000 per tonne on 20 July.
Revenue Secretary Tarun Bajaj had said after the imposition of the tax on 1 July that it would be reviewed every 15-days factoring in the foreign exchange rate and global crude prices, among other factors.
Government first imposed windfall taxes on July 1 amid high profits incurred by oil and gas companies due to elevated energy prices on the back of the Russia-Ukraine conflict. Domestic producers sell crude to refiners at prices benchmarked on international prices. The bellwether Brent crude prices were largely at multi-year high levels since February till a month back.
Oil prices fell about 1 per cent in early trade on Wednesday, reversing gains from the previous session ahead of a meeting OPEC+ producers on fears of a slowdown in global growth hitting fuel demand and a firmer dollar. Brent crude futures fell 94 cents, or 0.9 per cent, to $99.60 a barrel at 0020 GMT, wiping out the previous session’s gain.