In the third round of revisions since the introduction of the windfall profit tax on oil export in July 2022, the Centre has revised the tax levy by increasing the export cess on diesel to ₹7 per litre from ₹5 per litre. The ₹2/litre export tax on aviation turbine fuel (ATF) has been imposed again after it was scrapped earlier this month. In a relief to oil producers like state-owned ONGC and Vedanta Ltd., the windfall tax on the export of domestically produced crude oil has been cut to ₹13,000 per tonne from ₹17,750/tonne earlier, shows the latest notification by the revenue department of the finance ministry.
These new rates will be applicable from today. Amid the government announcement, the shares of three out of four oil producers and refiners are trading in the red currently. The shares of Oil & Natural Gas Corporation Ltd. have opened up in the early morning trade at 1.44% to ₹137.5, while the Reliance Industries Ltd., GAIL (India) Ltd., and Indian Oil Corporation stocks are down by 0.39%, 1.41%, and 0.41%, respectively.
The FinMin reviews cess levy fortnightly taking into view the global crude oil prices. The price of Brent and U.S. crude rose over 3% in overnight trade as stellar U.S. macro data and robust fuel consumption eased concerns about economic growth, brushing off worries about fuel demand outlook. In early Asian trading hours on Friday, the Brent oil for October delivery was down 0.16% at $96.44 per barrel, while the U.S. West Texas Intermediate (WTI) crude September futures fell 0.12% to $90.39 a barrel.
The ministry, in its last notification on August 2, had increased the windfall tax on domestically produced petroleum crude to ₹17,750 per tonne from ₹17,000 per tonne before that. The tax on diesel export was cut to ₹5 per litre from ₹11 per litre earlier, and the ATF export levy, which was ₹5 per litre earlier, was removed.
The government had provided a breather to oil producers and refiners in its first revision on July 20, 2022. The export levy of ₹6 rupees per litre on petrol was removed, while the windfall tax on the export of diesel and ATF, at that time, was cut by ₹2 per litre. The levy on the export of domestically produced petroleum crude was cut to ₹17,000 a tonne from ₹23,250.
The Centre first introduced a cess of ₹23,250 per tonne by way of special additional excise duty (SAED) on domestically produced crude oil on July 1, 2022. Import of crude oil was not subject to this cess.
The reasons for the Centre to introduce a windfall tax on oil export was simple: the government wanted to tap into the huge profits oil producers and refiners were making on oil export. Crude prices have risen sharply in recent months, and domestic crude producers sell crude to domestic refineries at international parity prices. As a result, the domestic crude producers were making windfall gains. All in all, these measures were supposed to compensate for the excise duty cut on fuel, which was announced in May 2022.
Finance minister Nirmala Sitharaman, in a reply in the Lok Sabha on August 8, 2022, had said international crude prices, diesel, petrol and ATF prices had risen sharply recently, and crude producers were making "extraordinary cracking margins" and thus "super normal profits".