The government reduced the windfall profit tax on locally produced crude oil from Rs 4,900 per tonne to Rs 1,700 per tonne on Thursday. The tax on aviation fuel ATF has been reduced to Rs 1.5 per liter, according to the news agency ANI. The revised tax rates go into effect today, according to the finance ministry’s notification.
Crude prices remained largely stable as a result of strict Covid-19 restrictions in China and concerns about demand from the world’s second-largest crude oil importer.
Windfall profit tax is usually calculated by deducting any price that producers receive above a certain threshold, whereas the levy on fuel exports is calculated based on cracks or margins that refiners make on overseas shipments. These margins are essentially the difference between the realized international oil price and the cost.
On July 1, India decided to impose windfall profit taxes for the first time, joining a growing number of countries that tax supernormal profits of energy companies. At the time, export duties on petrol and ATF were Rs 6 per liter ($12 per barrel), and diesel was Rs 13 per liter ($26 per barrel). A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also imposed.
Since its inception, the government has revised the windfall tax nearly every two weeks. Reliance and other private oil companies
The levy was intended to compensate for the reduction in excise duty on gasoline and diesel, thereby providing relief to consumers. However, the decrease in the windfall cess from the initial levels is expected to reduce the government’s realization.
Industries Ltd and Nayara Energy, a subsidiary of Rosneft, are the main exporters of fuels such as diesel and ATF. Domestic crude producers such as the state-run Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd are affected by the windfall levy.