The Centre on Thursday slashed the windfall profit tax on locally produced crude oil to Rs 1,700 per tonne from Rs 4,900 per tonne on domestically produced crude oil. Tax on aviation fuel ATF is been cut to Rs 1.5 per litre, The revised tax rates become effective from today onwards, the notification from the finance ministry added.
Crude prices largely remained subdued on the back of strict Covid-19 restrictions in China and concerns over demand from the world’s second-largest crude oil importer.
Windfall profit tax is usually arrived upon by taking away any price that producers are getting above a threshold while the levy on fuel exports is based on cracks or margins that refiners make on overseas shipments. These margins are basically the difference between the international oil price realised and the cost.
India imposed windfall profit taxes for the first time on July 1 to join a growing number of nations that tax super normal 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 domestic crude production was also levied.
The government has been revising the windfall tax almost every two weeks since its introduction. Private oil companies Reliance
The levy was aimed to compensate for the reduction in the excise duty on petrol and diesel to provide relief to consumers. But the reduction in the windfall cess from the initial levels is expected to reduce the realisation for the government.
Industries Ltd and Rosneft-based Nayara Energy are the primary exporters of fuels like diesel and ATF. The windfall levy on domestic crude impacts producers such as state-run Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd.