The government has hiked the windfall tax on domestically produced crude oil while reducing the rate on the export of diesel.
The tax on crude oil produced by state-owned Oil and Natural Gas Corporation was hiked to Rs 10,200 per tonne, from Rs 9,500 per tonne, with effect from November 17. In the fortnightly revision of the windfall tax, the government cut the rate on the export of diesel to Rs 10.5 per litre, from Rs 13 per litre. The levy on diesel includes Rs 1.50 per litre road infrastructure cess.
The export tax on jet fuel or ATF, which was set at Rs 5 a litre in the last review on November 1, has not been altered. When the levy was first introduced, a windfall tax on the export of petrol alongside diesel and ATF too was levied. But the tax on petrol was scrapped in subsequent fortnightly reviews.
India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of Rs 6 per litre ($ 12 per barrel) each were levied on petrol and aviation turbine fuel 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.
While the 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 between the international oil price realised and the cost.
