On Thursday, the Centre reduced the windfall profit tax on domestically produced crude oil from Rs 4,900 per tonne to Rs 1,700 per tonne. According to sources, the tax on aviation fuel ATF has been reduced to Rs 1.5 per litre. According to the statement from the finance ministry, the new tax rates would be in force starting today.
Centre reduces windfall tax on locally produced crude oil from Rs 4900 per tonne to Rs 1700 per tonne
Because of China’s severe Covid-19 restrictions and concerns about demand from the second-largest crude oil importer in the world, petroleum prices have mostly remained low.
While the tax on petroleum exports is based on the cracks or margins that refiners make on international shipments, windfall profit tax is often calculated by deducting any price that producers are getting above a threshold. These margins are essentially the difference between the cost and the realised international oil price.
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On July 1st, India enacted windfall profit taxes
On July 1, India implemented windfall profit taxes for the first time, joining an increasing number of countries that tax energy companies’ higher-than-average profits. At the time, export taxes on gasoline, ATF, and diesel were each charged at the rate of Rs 6 per litre ($12 per barrel), and Rs 13 per litre ($26 per barrel). On domestic crude output, a windfall profit tax of Rs 23,250 per tonne ($40 per barrel) was also imposed.
Since its implementation, the government has updated the windfall tax approximately every two weeks. Reliance on private oil companies
The charge was intended to bring assistance to consumers by making up for the reduction in the excise duty on gasoline and diesel. However, it is anticipated that the government’s revenue will decrease due to the windfall cess’s decline from its initial levels.
The main exporters of fuels like diesel and ATF are Industries Ltd and Rosneft-based Nayara Energy. Producers include the government-run Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd. are impacted by the windfall charge on domestic petroleum.
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