Mukesh Ambani & Anil Agarwal lose ₹1.17 lakh crore in few hours as government imposes two different oil taxes

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  • Government struck today windfall tax and an export on Crude oil Affecting producers — ONGCVedanta group, Oil India, RIL and more.
  • Shares of all of these oil-producing companies have collapsed after the news, with state-owned company ONGC falling the steepest by more than 11%.
  • All because of rising crude oil prices that have been Russia Ukraine war which fueled inflation in the country.

The government that has been on the ‘give’ end of subsidies and tax cuts has suddenly changed course – raising the GST plates and pulling more under this umbrella. But it doesn’t stop there.

Today, the Ministry of Finance also imposed a much-dreaded but anticipated windfall tax on crude oil producers in India such as the state-owned ONGC, the Vedanta group with its Barmer oil producing fields, Oil India and more.

It also brought in export-oriented petroleum units such as Reliance’s Jamnagar refineries — which import crude oil and export processed fuel — with an export tax. It was one of the biggest losers in Sensex falling more than 6% – knocking off a massive ₹1.13 lakh crore from its market cap.

All domestic crude oil producers have benefited from the rise in international prices. Indian refineries have also extracted by producing Russian crude oil that many international refiners shy away from.

“Due to production quotas, the Chinese refining throughput is under constant pressure. The European Union’s decision to completely phase out Russian petroleum products, which were estimated to be about 1.2 mbpd, according to Reuters, is likely to widen product rifts,” said a Haitong report on Reliance Industries before the tax was announced. However, these margins will not remain intact for much longer.

At the same time, another oil producer ONGC crashed 11.65%, although many brokers have been anticipating a windfall and its effects on this stock for months. Chennai Petroleum (–7%), Mangalore Refinery and Petrochemicals (-9%), Hindustan Oil Exploration (–5.6%) were also among the biggest losers.

Oil India fell more than 6% in morning trading and Vedanta also fell 3% – pushing the metals by market cap of the oil group down 4,192 crore to ₹78,804 crore as of 12:04 PM.

Ordinary man versus crude oil producers and refiners
Indian government that has taken a neutral stance on the war between Russia and Ukraine. It now appears to be taking away some of the profits that the companies have enjoyed, thanks to international policies.

The Russian war has also changed the inflationary economy for India – after fuel prices skyrocketed. To alleviate some of that pressure, the government cut excise taxes on petrol and diesel by ₹8 per liter and ₹6 per liter respectively in May to ease the burden on the common man.

It should also be noted here that the government had increased excise taxes on both products in the midst of the pandemic when crude oil prices hit rock bottom – indicating that these taxes and rollbacks are a way of managing the Treasury’s books.

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