The government on late Tuesday increased the windfall tax on domestically produced crude to Rs 17,750 a tonne from Rs 17,000 a tonne earlier, a move that will hit producers like ONGC and Vedanta Ltd. Also, government lowered the export tax on diesel and aviation turbine fuel in line with softening international petroleum product prices. This is the second round of the revision of the newly-introduced windfall tax. The new changes will come to effect from August 3.
The Central Board of Excise and Customs (CBIC), in its notification, has cut the levy on diesel to Rs 5 per litre from Rs 11 per litre earlier. In addition, it also scrapped Rs 4 per litre on export of aviation turbine fuel. However, the levy on export of petrol remained nil.
India first imposed windfall taxes on July 1, joining a growing number of nations that taxes super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.
On July 1, export duties of Rs 6 per litre ($12 per barrel) were levied on petrol and ATF and a Rs 13 a litre tax on export of diesel ($26 a barrel). The Rs 23,250 per tonne windfall tax on domestic crude production ($40 per barrel) was also levied.
Thereafter, in the first fortnightly review on July 20, the Rs 6 a litre export duty on petrol was scrapped, the tax on the export of diesel and jet fuel (ATF) was cut by Rs 2 per litre each to Rs 11 and Rs 4 respectively. The tax on domestically produced crude was also cut to Rs 17,000 per tonne.
The new tax was imposed after the domestic companies were seen to be making huge profits since global oil prices have shot up amid geopolitical turmoil.
While introducing the new levies, the government had said that it will review exports and imports of these items every fortnight to amend its decision.
Now, the export tax on diesel and ATF has been cut following a drop in refinery cracks or margins. But the levy on domestically produced crude oil has been raised in line with marginal increase in international crude prices.