New Delhi:
The government has cut windfall profits tax on domestically produced crude oil and on exports of diesel and ATF (aero-turbine fuel) in line with falling international oil prices, according to an official order.
The duty on crude oil produced by companies like Oil and Natural Gas Corporation (ONGC) has been reduced from Rs 2,100 per tonne to Rs 1,900 per tonne, the January 16 order said.
Crude oil pumped out of the ground and from under the seabed is refined and converted into fuel such as gasoline, diesel and ATF.
The government has also reduced the tax on diesel exports to Rs 5 per litre, from Rs 6.5 and the same on overseas shipments of ATF to Rs 3.5 per litre, from Rs 4.5 per litre.
The new tax rates are effective January 17.
The windfall profit tax on domestically produced crude is the second lowest since the new levy was introduced in July 2022. The tax had dropped to Rs 1,700 per ton by the second half of December 2022.
The levy on diesel exports is now equivalent to the lowest hit in the first half of August and October 2022 and the second half of December 2022.
Tax rates were raised in the last biweekly review on Jan. 3, reflecting a strengthening in global oil prices. Since then, international oil prices have fallen, necessitating a reduction in a windfall tax.
India imposed its first windfall tax on July 1, joining a growing number of countries taxing supernormal profits from energy companies. At that time, export duties of Rs 6 per liter ($12 per barrel) each were levied on petrol and ATF and Rs 13 per liter ($26 per barrel) on diesel.
A windfall profit tax of Rs 23,250 per ton ($40 per barrel) was also levied on domestic crude oil production.
The export tax on petrol was removed in the very first revision.
Tax rates are revised every two weeks based on average oil prices in the previous two weeks.
Reliance Industries Ltd, which operates the world’s largest single-site oil refinery complex at Jamnagar in Gujarat, and Rosneft-backed Nayara Energy are the country’s major exporters of fuel.
The government taxes windfall profits from oil producers at any price above a threshold of $75 per barrel.
The fuel export levy is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the realized international oil price and the cost price.
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