Govt hikes windfall profit tax on crude oil, cuts levy on diesel exports

PTI, Nov 1, 2023, 9:15 AM IST

New Delhi: The government on Tuesday increased the windfall profit tax on crude oil produced in the country and reduced the levy on exports of diesel.

The tax, levied in the form of Special Additional Excise Duty or SAED, on domestically produced crude oil was increased to Rs 9,800 per tonne from Rs 9,050 a tonne, according to an official notification.

SAED on the export of diesel was reduced to Rs 2 per litre from Rs 4 a litre and on jet fuel or ATF to nil from Rs 1, the notification said.

SAED on export of petrol will continue to be zero.

The new tax rates will come into effect from Wednesday.

India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax supernormal profits of energy companies. At that time, export duties of Rs 6 per litre ($12 per barrel) each were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.

A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) was also levied.

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel.

Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products.

International crude oil prices averaged $90.17 per barrel in October.

The levy on domestic crude oil dropped to nil in the first half of April as international crude oil prices fell but was back in the second half in step with a rise in rates.

Levy on diesel became nil in April but the levy was brought back in August. Levy on ATF became nil in March and was brought back in second half of August.

The export tax on petrol was scrapped in the very first review.

Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel (ATF).

Reliance Industries Ltd, which operates the world’s largest single-location oil refinery complex at Jamnagar in Gujarat, and Rosneft-backed Nayara Energy are primary exporters of fuel in the country.