The tax on domestic crude oil has been entirely eliminated thanks to a change in the windfall tax that was announced on Tuesday. The tax has now been lowered to zero from roughly a fortnight ago when it was 3,500 per tonne. This comes after a steep 20% drop in global crude oil prices since the beginning of 2023.
The action should aid ONGC and Oil India, two majors in exploration, in increasing their margins. The stock prices of ONGC and Oil India should rise, as expected. Over 4.62 million tonnes of crude oil were produced by ONGC between October and December 2022.
A total of 2.93 million tonnes were produced in January and February. With an estimated 1.5 million tonnes of production each month on average, the elimination of the windfall tax should allow ONGC to save 263 crores. Between October and December, the corporation achieved an operational profit of Rs. 21,871 crores.
During the third quarter of FY23, Oil India produced 0.8 million tonnes of oil, and 0.52 million tonnes in January and February. The corporation should save around $46 crore with a 0.26 million tonne monthly production average. Operating income of 3,908 crores was reported for the three months ending in October-December.
Due to the fact that it is reviewed every two weeks, the calculation only considers a windfall tax advantage of zero for a fortnight. Also, the decision by OPEC to reduce production over the past few days has caused crude prices to spike. One cannot rule out a rise in the windfall tax when the government meets in two weeks, given the rapid spike in petroleum.
