The government on Thursday announced a reduction in the windfall profit tax on domestically produced crude oil and diesel exports, aligning with the downward trend in global oil prices.
Imposed as Special Additional Excise Duty (SAED) tax on crude oil has been lowered from ₹9,800 per tonne to ₹6,300 per tonne, as stated in an official release, PTI reported.
Meanwhile, the government has decided to decrease the SAED on diesel exports from ₹2 per liter to Re 1 per liter.
Also, there will be no changes in the duty for the export of aviation turbine fuel (ATF) and petrol, and it will remain at zero, as outlined in the latest decision.
The new tax rates came into effect from Thursday.
In the previous adjustment, which took effect on November 1, the government raised the tax on crude oil from ₹9,050 per tonne to ₹9,800 per tonne. Subsequently, the duty on diesel exports was reduced by half to ₹2 per liter, while the levy on jet fuel was eliminated, bringing it down from Re 1 per liter to nil.
Due to a decline in international oil prices since the last adjustment, there has been a necessity for a reduction. The monthly average for the basket of crude oil imported by India was USD 84.78 per barrel in the current month, compared to the averages of USD 90.08 per barrel in October and USD 93.54 per barrel in September.
India initially implemented windfall profit taxes on July 1 of the previous year, aligning with a global trend of taxing the supernormal profits of energy companies. During that initial implementation, export duties of ₹6 per liter (USD 12 per barrel) were imposed on both petrol and aviation turbine fuel (ATF), along with ₹13 per liter (USD 26 per barrel) on diesel.
A ₹23,250 per tonne (USD 40 per barrel) windfall profit tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) was also levied.
The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.
A windfall tax is imposed on domestically produced crude oil when the rates of the global benchmark exceed USD 75 per barrel. For the export of diesel, aviation turbine fuel (ATF), and petrol, the levy is applicable when the product cracks, or margins, surpass USD 20 per barrel.
Product cracks or margins represent the difference between the cost of crude oil (raw material) and the value of the finished petroleum products.
The levy on domestic crude oil dropped to nil in the first half of April as international crude oil prices fell but was back in the second half in step with a rise in rates.
The tax on diesel was eliminated in April but was reintroduced in August. Similarly, the duty on ATF was reduced to nil in March but reinstated in the second half of August.
The process involves refining and converting crude oil extracted from the ground or beneath the seabed into various fuels such as petrol, diesel, and ATF.
Key players in fuel export in India include Reliance Industries Ltd, operating the world’s largest single-location oil refinery complex in Jamnagar, Gujarat, and Nayara Energy, which Rosneft backs.