Windfall tax on crude oil increased, levy on diesel exports lowered

The government lowered the windfall tax on Tuesday domestically produced crude oil while the tariff on diesel and jet fuel (ATF) exports was increased in line with the rise in international oil prices.



The tax on Crude oil produced by companies such as the state-owned Oil and Natural Gas Corporation (ONGC), was reduced to Rs.9,500 per tonne from Rs.11,000 as of November 2, a government notice showed.

In the bi-weekly review of the windfall tax, the government raised the rate for diesel exports from Rs 12 per liter to Rs.13 per litre.

The levy on jet fuel was also increased from Rs 3.50 to Rs.5 per litre. The levy on diesel includes Rs 1.50 per liter Road Infrastructure Tax (RIC), the notification showed.

When the levy was first introduced, a windfall tax was levied on gasoline exports in addition to diesel and ATF. But the gasoline tax was dropped in subsequent biweekly reviews.

While the unexpected profit tax is calculated by taking out any price that producers get above a threshold, the fuel export levy is based on cracks or margins that refiners earn on overseas shipments. These margins are mainly a difference between the realized international oil price and the costs.

India imposed its first windfall tax on July 1, joining a growing number of countries taxing supernormal profits from energy companies.

At that time, export duties of Rs.6 per liter (USD 12 per barrel) each were levied on petrol and jet turbine fuel and Rs.13 per liter (USD 26 per barrel) on diesel.

A windfall profit tax was also levied on domestic crude oil production.

In the previous rounds, the rights were partially adjusted on July 20, August 2, August 19, September 1, September 16, October 1, and October 16.

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