Oil stocks trade mixed after govt hikes windfall tax on domestic crude

Shares of oil and gas retailers were mixed on Thursday after the government hiked the windfall tax on domestically produced crude oil and slashed the tax on the export of diesel. The export tax on 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 hiked to ₹10,200 per tonne from ₹9,500 per tonne, whereas the tax of export of diesel has been slashed to ₹10.5 per litre from ₹13 per litre. The windfall tax on the export of jet fuel has remained unchanged at ₹5 per litre.

Following the development, shares of Oil & Natural Gas Limited (ONGC), the country’s largest oil and gas producer slipped 0.10% to ₹142.75, while Bharat Petroleum Corporation Ltd (BPCL) stock dipped 0.44% at ₹305. However, shares of Hindustan Petroleum Corporation Ltd (HPCL) rose marginally by 0.10% to ₹209.20. The share price of Reliance Industries stock declined 0.6% to ₹2,590, whereas the shares of Indian Oil Corporation Limited declined 0.43% to ₹69.05. Meanwhile, the NSE Nifty energy index declined 0.29% to 26,683.

On Thursday, the BSE Sensex plunged 122 points or 0.20% to 61,858, whereas the NSE Nifty 50 index declined 46 points or 0.25% to 18,363. At the interbank exchange, the domestic currency, the rupee, also declined 37 paise to 81.63 against the U.S. Dollar. Moreover, the oil prices in the international market were down in the early trade on Thursday amid concerns about geopolitical tensions as well as a rise in Covid-19 cases in China. The Brent crude oil benchmark declined $1.04 or 1.1% to $91.82 per barrel whereas the US West Texas Intermediate (WTI) crude futures skidded $1.17 or 1.4% to $84.42 per barrel.

On July 1 this year, the Indian government joined a group of nations that have imposed a windfall tax on crude oil owing to soaring energy prices. The government had 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, in order 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.