Shares of the oil and gas retailers surged on Friday after the central government slashed the windfall tax on domestically produced crude oil to ₹4,900 per tonne with effect from December 2. The government also reduced the windfall tax on the export of diesel to ₹8 per litre. However, the windfall tax on the export of jet fuel or aviation turbine fuel (ATF) was kept unchanged. According to a government notification, in a fortnightly review, the windfall tax on domestically produced crude oil has been halved to ₹4,900 per tonne from ₹10,200 per tonne, whereas the tax of export of diesel has been slashed to ₹8 per litre from ₹10.5 per litre.
Following this development, shares of Oil & Natural Gas Limited (ONGC), the country’s largest oil and gas producer surged 1.29% at ₹141.80, while Bharat Petroleum Corporation Ltd (BPCL) stock advanced 0.35% at ₹339. The share price of Indian Oil Corporation Ltd surged 0.85% at ₹76.85. However, shares of Hindustan Petroleum Corporation Ltd (HPCL) witnessed a marginal decline by 0.13% to ₹236, and the share price of Reliance Industries stock declined 0.12% to ₹2,719. The NSE Nifty energy index declined 0.54% to 27,035.
On Friday, the S&P BSE Sensex opened a tad higher at 62,978 from the closing price of the previous session at 63,284. At the time of reporting, Sensex declined 497 points or 0.79% at 62,788, whereas the Nifty 50 index plunged 145.25 points or 0.77% at 18,667. At the interbank exchange, the Indian currency rupee gained 18 paise to 81.08 against the US Dollar. Moreover, oil prices edged higher in hopes of further relaxation of the curbs in Covid-19 lockdown in China. The Brent crude oil benchmark was up 20 cents or 0.23% at $87.08 per barrel, whereas the US West Texas Intermediate (WTI) crude futures advanced 6 cents or 0.07% to $81.28 per barrel.
On July 1 this year, the Indian government joined a group of nations that imposed a windfall tax on crude oil owing to soaring energy prices. The government imposed a cess of ₹23,250 per tonne on domestic crude oil and slapped a ₹6 per litre tax and ₹13 per litre tax on the export of petrol and diesel respectively. However, after the initial cut, the windfall tax on petrol has been scrapped over subsequent fortnightly reviews.
Notably, the Centre first introduced a cess of ₹23,250 per tonne through special additional excise duty (SAED) on domestically produced crude oil on July 1, 2022. Import of crude oil was not subject to this cess. However, to tap into the huge profits of oil refiners and retailers, the government decided to impose a windfall tax on oil export. The measures were supposed to compensate for the excise duty cut on fuel, which was announced in May 2022.