Govt cuts windfall tax on crude oil output, diesel exports

Finance Ministry on Thursday announced revision in windfall tax on energy companies as crude oil prices have cooled off globally. 

Windfall tax on crude production has been revised to Rs 4,900 per tonne, which comes into effect from December 2, from the existing Rs 10,200 per tonne, as per a government notification issued on Thursday.

In the fortnightly revision of windfall profit tax, the government cut the rate on export of diesel to Rs 8 per litre from Rs 10.5 per litre. The levy includes Rs 1.5 per litre as road infrastructure cess.

The special additional excise duty on petrol continues to remain nil and that on aviation fuel ATF at Rs 5 a litre.

India first imposed windfall profit taxes on July 1, joining a list of nations that tax super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.

When the levy was first introduced, a windfall tax on export of petrol alongside diesel and ATF (Aviation Turbine Fuel) too was levied. But the tax on petrol was scrapped in subsequent fortnightly reviews.

While windfall profit tax is calculated by taking away any price that producers are getting above a threshold, the levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference of international oil price realised and the cost.

At that time, export duties of Rs 6 per litre ($12 per barrel) each were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel. A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied.

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With inputs from agencies