In response to rising global oil prices, the Central government on Febraury 16 cut the windfall profit tax assessed on locally produced crude oil as well as on the export of diesel and aviation turbine fuel (ATF).
According to an official order, the tax on crude oil produced by firms like Oil and Natural Gas Corporation (ONGC) has been reduced from Rs. 5,050 per tonne to Rs. 4,350 per tonne. Also, the government reduced the tariff on diesel exports from Rs. 7.5 per litre to Rs. 2.50 per litre. There is still no particular supplementary excise charge on gasoline. In the meantime, the tax on ATF exports has been reduced from Rs. 6 per litre to Rs. 1.50 per litre.
On February 16, the new tax rates went into effect.
Crude oil is refined and transformed into fuels like Petrol, diesel, and ATF after it is extracted from the earth and the ocean floor. On July 1, 2022, India implemented windfall profit taxes for the first time, joining an increasing number of countries that tax energy businesses' higher-than-average profits. At the time, export taxes on gasoline, ATF, and diesel were each charged at the rate of Rs. 6 per litre (USD 12 per barrel), and Rs. 13 per litre (USD 26 per barrel). Every two weeks, the levy is reviewed, and rates are adjusted in accordance with market oil prices.
The country's main fuel exporters are Reliance Industries Ltd., which has the largest single-location oil refinery complex in the world at Jamnagar, Gujarat, and Nayara Energy, which is supported by Rosneft.
The price reductions happened as refiners kept stockpiling cheap Russian fuel despite a steady rise in local use. Refiners and explorers' profits had been suffering as a result of the windfall taxes, including Reliance Industries, Vedanta Ltd, Oil India, and Mangalore Refinery and Petrochemicals Ltd.
The government imposes tax on oil producers' unforeseen gains on any price they receive that is more than a cap of USD 75 per barrel.
The tax on petroleum exports is calculated based on the margins or cracks that refiners make from international shipments. These margins are largely the difference between the cost and the realised international oil price.
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