Windfall profit tax on crude oil and diesel exports decreases

In response to falling international oil prices, the government reduced the windfall profit tax on domestic crude oil and diesel exports on Thursday.

According to an official statement, the Special Additional Excise Duty (SAED) on domestically produced crude oil has been decreased from Rs 9,800 per tonne to Rs 6,300 per tonne.

SAED on fuel exports was decreased from Rs 2 per litre to Rs 1 per litre.

The tariff on the export of jet fuel, ATF, and gasoline will remain nil.

The new tax rates were effective on Thursday.

The government raised the crude oil tax to Rs 9,800 per tonne from Rs 9,050 per tonne in the most recent review, which took effect on November 1. Simultaneously, the charge on diesel exports was cut in half to Rs 2 and the levy on jet fuel was reduced to nil from Rs 1 per litre.

Since the last revision, international oil prices have fallen, forcing the cut. This month, the basket of crude oil that India imports averaged USD 84.78 per barrel, compared to USD 90.08 per barrel in October and USD 93.54 in September.

This month, the basket of crude oil that India imports averaged USD 84.78 per barrel, compared to USD 90.08 per barrel in October and USD 93.54 in September.

On July 1, last year, India became the first country to impose windfall profit taxes on energy corporations, joining a growing list of countries that do so. At the time, export tariffs on petrol and ATF were Rs 6 per litre (USD 12 per barrel), while diesel was Rs 13 per litre (USD 26 per barrel).

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

The tax rates are reviewed every two weeks depending on the average of the previous two weeks’ oil prices.

Domestic crude oil is subject to a windfall tax if global benchmark prices increase above USD 75 per barrel. Diesel, ATF, and gasoline exports are subject to the charge if product cracks (or margins) exceed USD 20 per barrel.

The difference between crude oil (raw material) and finished petroleum products is represented by product cracks or margins.

The domestic crude oil levy decreased to zero in the first half of April as international crude oil prices plummeted, but it returned in the second half as interest rates rose.

The diesel levy was eliminated in April, but it was reinstated in August. The ATF levy was eliminated in March and reinstated in the second half of August.

The petrol export tax was repealed in the first review.

Crude oil extracted from the ground and beneath the seabed is refined and transformed into fuels such as gasoline, diesel, and aircraft turbine fuel (ATF).

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

Also read: Moscow Acknowledges Ukrainian Troops Positions on the Dnipro River