In its second revision in windfall tax imposed on July 1, the Centre has raised the levy on petroleum crude, and also cut special tax on diesel and ATF (aviation turbine fuel) exports.
The finance ministry, in a notification issued late Tuesday, says the windfall tax on domestically produced petroleum crude will be increased to ₹17,750 per tonne from ₹17,000 per tonne earlier. The tax on diesel export has been cut to ₹5 per litre from ₹11 per litre earlier. The ₹5 per litre levy on ATF has also been removed.
These new rates will be applicable from today. Amid the government announcement, the shares of three out of four oil producers and refiners are down today. The RIL stock is up 0.16%, while the shares of Oil & Natural Gas Corporation Ltd., GAIL (India) Ltd., and Indian Oil Corporation are down by 1.39%, 1.77%, and 0.28%, respectively.
In the first revision on July 20, the ministry, in a breather to oil producers and refiners, had removed an export tax of ₹6 rupees per litre on petrol. The windfall tax on the export of diesel and ATF, at that time, was cut by ₹2 per litre. Besides, the levy on the export of domestically produced crude oil was also cut to ₹17,000 a tonne from ₹23,250.
The FinMin reviews cess levy fortnightly taking into view the global crude oil prices. The price of Brent and U.S. crude edged higher in early trade on Wednesday, hovering around $100 per barrel, as uncertainty about global economic growth and demand outlook weighed on market sentiments.
In early Asian trading hours, Brent oil for September delivery was up 0.12% at $100.66 per barrel, while the U.S. West Texas Intermediate (WTI) crude September futures rose 0.26% to $94.67 a barrel. This crude oil price dropped from around $104 per barrel on July 21, when the first revision was announced.
The Centre had 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. Import of crude oil was not subject to this cess. This levy was cut to ₹17,000 a tonne on July 20.
Crude prices have risen sharply in recent months. The domestic crude producers sell crude to domestic refineries at international parity prices. As a result, the domestic crude producers were making windfall gains. The Centre then introduced these levies to tap into their profits.
All in all, these measures were supposed to compensate for the excise duty cut on fuel, which was announced in May. These measures were also supposed to ease pressure on the current account deficit in the backdrop of the rising imports bill and cash in on the super normal profits of energy companies.
Small producers, whose annual production of crude in the preceding financial year is less than 2 million barrels, were exempted from this cess. The government also announced hikes in taxes on the export of petrol, diesel and ATF -- a levy of ₹6 per litre on petrol, ₹13 per litre on diesel, and ₹6 per litre on ATF exports. Since global crude oil prices have dropped marginally since then, this will reduce the profit margins of oil producers and refiners.