Shares of oil marketing companies, such as Reliance Industries and Oil Natural Gas Corporation (ONGC), rose up to 6% in opening trade on Wednesday after the government scrapped a levy on gasoline exports and lowered windfall taxes on other fuels, following a drop in international crude prices.

In the oil and gas space, state-owned ONGC was the best performer with a 5.6% gain, followed by GAIL India and Gujarat Gas, which rose up to 3% each. Shares of Reliance Industries, the country’s most valued firm, also climbed over 2.5%, in sync with the broader market. At the time of reporting, the BSE benchmark Sensex was trading 640 points higher at 55,408 levels.

Among others, shares of government-controlled Indian Oil, Indraprastha Gas, Petronet LNG, and BPCL gained more than 1%.

In a major boost to oil companies, the government on Tuesday announced a cut in windfall tax on oil producers and refiners and exempted petrol from an export levy, less than three weeks after it levied these charges to ease inflationary pressure on the economy. These changes, that will be effective from July 20, are likely to help oil retailing companies to boost their profitability margins.

The central government has removed an export tax of ₹6 rupees per litre on petrol, while windfall tax on diesel and aviation turbine fuel (ATF) exports have been cut by ₹2 per litre. Besides, tax on domestically produced crude oil has been reduced to ₹17,000 a tonne from ₹23,250, as per statement issued by the government.

On July 1, the government had hiked export taxes on fuel and imposed an additional tax charged on windfall gains made by domestic refineries. The Centre had levied a special additional excise duty of ₹6 per litre on exports of petrol, ₹13 per litre on exports of diesel, and ₹6 per litre on exports of jet fuel to ease pressure on the current account deficit in the backdrop of the rising imports bill. It had also imposed a cess of ₹23,250 per tonne by way of special additional excise duty (SAED) on crude.

In the recent past, oil companies have witnessed selling pressure due to sharp decline in international crude prices that are likely to hurt their margins. The price of Brent crude – the international benchmark – dropped below $100 a barrel this week, from a record high of $140 in April due to supply disruption caused by a ban on Russian oil imports following Moscow invasion of Ukraine. The recent fall in crude prices can be attributed to weak demand outlook in the backdrop of Covid restriction in China, the world’s largest oil consumer, and recession fear due to aggressive rate hike by central banks globally.

In Asian trading hours on Wednesday, the Brent oil for September delivery was down 0.1% to $107.3 per barrel, while the U.S. West Texas Intermediate (WTI) crude September futures were trading 0.3% lower at $100.45 a barrel.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.