Windfall tax drop on crude oil, increase on export diesel

The windfall tax on domestically produced crude oil has been decreased, while the tax on diesel has been increased by the Finance Ministry. The revised levy became effective on Tuesday. A notification states that the windfall levy, formally known as Special Additional Excise Tax (SAED), has been reduced from $4,400 per tonne to $3,500 per tonne. The drop in the price of crude oil on the world market can be one of the causes. Companies like Oil and Natural Gas Corporation will benefit from this (ONGC).

Entities with annual crude oil production of less than 2 million barrels during the previous fiscal year are not subject to the SAED. However, due to rising product costs and to ensure greater diesel availability, the Ministry increased the tax on diesel for export from 0.50 to 1 liter. The main fuel exporters are Reliance Industries and Nayara Energy, which are funded by Rosneft.

In July of last year, India became the first country to implement windfall profit taxes, joining a number of other countries that do so. The export tariff at the time was $6 per liter ($12/bbl) for gasoline and ATF and $13 per liter ($26/bbl) for diesel. Moreover, a windfall profit tax of 23,250 per tonne ($40/bbl) was imposed on domestic crude output.

Based on oil prices from the previous two weeks, the tax rates are adjusted every two weeks. Any time the price of oil exceeds a predetermined threshold of $75 per barrel, the government taxes producers’ windfall profits. The statistics on SAED’s crude oil production are not kept separately, according to the Finance Ministry. According to estimates, the production of crude oil, and exports of gasoline, diesel, and aviation turbine fuel will generate a total of $25,000 crore in SAED revenue for the current fiscal year.

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