The government on Tuesday hiked the windfall tax or special additional excise duty (SAED) on domestically produced petroleum crude to ₹4,250 per tonne from ₹1,600 per tonne earlier with effect from August 1. The government has also hiked the windfall tax on diesel to ₹1 per litre from nil. The windfall tax on petrol and aviation turbine fuel has, however, remain unchanged.

Following the development, shares of Indian Oil Corporation Limited (IOCL) and Hindustan Petroleum Corporation Limited (HPCL) rose between 0.8% and 1%, respectively on Tuesday. Shares of Bharat Petroleum Corporation Limited (BPCL), however, declined.

The stock of Oil & Natural Gas Limited (ONGC), the country's largest oil and gas producer, plunged as much as 1.4% to hit an intraday low of ₹174.30 apiece on the BSE. The share price of Reliance Industries plunged as much as 1.01% to hit an intraday low of ₹2,521.90. Shares of HPCL surged as much as 1.3% to hit an intraday high of ₹286.20, whereas the share price of IOCL surged as much as 1% to hit an intraday high of ₹94.74. The share price of BPCL declined as much as 0.9% to hit an intraday low of ₹374.10 apiece on the BSE.

The S&P BSE Sensex was trading flat at 66,511.47. The NSE Nifty Oil & Gas Index surged marginally by 0.1% to 8,142, whereas the NSE Nifty Energy Index was down 0.07% to 26,835.

Earlier today, the Brent crude futures for October was down 18 cents to $85.25 a barrel at 0402 GMT. The US West Texas Intermediate crude stood at $81.64 a barrel, down 0.2% or 16 cents.

In July last year, the government initially imposed the windfall tax on the exports of crude oil, diesel and aviation fuel after private refiners preferred overseas markets to gain from high refining margins, instead of selling at lower-than-market rates in the country. The tax rates are revised every fortnight based on prevailing international rates.

In January, rating agency Moody's said the country’s windfall tax on the exports of locally-produced oil has helped reduce the state-owned refining and marketing companies' marketing losses.

The government had earlier said the prices of petrol and diesel have not been increased by public sector oil marketing companies (OMCs) since April 6, 2022, despite record-high international prices. As a result, the three state-run fuel retailers — Indian Oil Corporation, BPCL and HPCL — booked a combined loss of ₹27,276 crore in the first six months of the last financial year, against the combined profit before tax of ₹28,360 crore in the first half of the financial year 2021-22. IOCL, BPCL and HPCL together control around 90% of the fuel retailing network in India.

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Govt hikes windfall tax on crude, diesel; here's how oil stocks reacted