The government decreased the windfall tax on diesel exports on Wednesday while raising it on domestically produced crude oil. According to a government statement, the tax on crude oil produced by local companies, such as the state-owned Oil and Natural Gas Corporation (ONGC), was increased from Rs 9,500 per tonne to Rs 10,200 per tonne with effect from November 17. The windfall tax rate on diesel exports has been reduced to Rs 10.5 per litre from Rs 13 per litre in the previous fortnightly revision. The jet fuel export tax, also known as ATF, which was set at Rs 5 per litre in the previous review, has remained the same.
The windfall tax, which is imposed as a special supplementary excise duty and is updated every two weeks by the central government, aims to absorb the superprofits made by domestic crude oil producers as a result of high global crude oil prices. Crude oil prices have decreased from $108 per barrel in March of this year to about $92 per barrel today. While U.S. West Texas Intermediate (WTI) crude futures slid 65 cents or 0.8% to $84.94 per barrel, Brent crude futures lost 62 cents, or 0.7%, to $92.24 per barrel. Following the commencement of Russian oil exports via the Druzhba pipeline to Hungary on Wednesday, Brent fell by 1.1% and WTI fell by 1.5%.
The Indian government introduced windfall profit taxes for the first time on July 1, joining an increasing number of countries that tax energy companies’ higher-than-average profits. At the time, diesel had an export duty of Rs 13 per litre, while petrol and aviation turbine fuel each had an export duty of Rs 6 per litre. On top of that, a windfall profit tax of Rs 23,250 per tonne was imposed on domestic crude production. In the ensuing fortnightly review, which took place on July 20, August 2, August 19, September 1, September 16, October 1, and November 1, 2022, some of the tasks were modified.
The tax on fuel exports is based on the cracks or margins that refiners make on international shipments, as opposed to the windfall profit tax, which is calculated by deducting any price that producers are receiving above a certain threshold. The primary source of these margins is the discrepancy between the realised international oil price and the pricing. The government’s income is tallied with the windfall gain tax. As a result, the government can offset its losses with the money collected from windfall taxes.