In its fourth round of revisions since the introduction of the windfall profit tax on oil export in July 2022, the government has increased levies on diesel and ATF export, and on domestically produced crude oil, according to a finance ministry notification issued late Wednesday night.

The export cess on diesel has been increased further to ₹13.5 per litre from ₹9 per litre earlier, while the aviation turbine fuel (ATF) will now attract an export levy of ₹9 per litre from ₹2 per litre earlier. The government has also increased the tax levy on crude oil that is produced in the country to ₹13,300 per tonne from ₹13,000 earlier. In a huge relief to oil producers like state-owned ONGC and Vedanta Ltd., the windfall tax on the export of domestically produced crude oil was cut to ₹13,000 per tonne during the previous revision from ₹17,750/tonne earlier.

The new rates will be applicable from today. After the latest revision in windfall tax gains, the shares of three out of four major oil producers and refiners are trading in the red currently. The shares of GAIL (India) Ltd. are up 0.70% at ₹137 on the NSE, while the stocks of Oil & Natural Gas Corporation Ltd., Reliance Industries Ltd., and Indian Oil Corporation are down by 2.89%, 1.74%, and 0.28%, respectively.

The FinMin reviews cess levy fortnightly taking into view the global crude oil prices. As per the latest data, Brent crude oil and U.S. crude prices fell in early trade on Thursday as increased supply and concerns about a fall in global fuel demand amid a slowdown in the global economy weighed on market sentiments. In early Asian trading hours on Thursday, the Brent oil for October delivery was down 0.53% at $95.13 per barrel, while the U.S. West Texas Intermediate (WTI) crude September futures dropped 0.46% to $89.14 a barrel.

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, two days after the Cabinet Committee on Economic Affairs approved its deregulation. The Centre had also levied a special additional excise duty of ₹6 per litre on exports of petrol and ₹13 per litre on exports of diesel to ease pressure on the current account deficit in the backdrop of the rising imports bill. Ever since then, the windfall tax has been revised four times.

The windfall tax on oil export was introduced to tap into the huge profits oil producers and refiners were making on oil export as a result of the global geo-political crisis that emerged in the wake of the Russia-Ukraine war. This led to a sharp rise in crude prices in recent months. Domestic crude producers sell crude to domestic refineries at international parity prices, and 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.

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