Windfall tax on domestic crude oil scrapped, halved on diesel exports

New Delhi, April 4

The government has cut the windfall profit tax on domestically produced crude oil to zero and halved the levy on the export of diesel to Rs 0.50 per litre in line with softening international oil prices, according to an official order.

The levy on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) has been reduced to nil from Rs 3,500 per tonne ($5.8 per barrel), the order dated April 3 said.

Alongside, the government cut the tax on the export of diesel to Rs 0.50 per litre from Re 1, and the same on overseas shipments of ATF remains at nil. The new tax rates come into effect from April 4, the order said.

The levy was cut in line with the softening trend seen in international oil prices in the second half of March. However, oil prices have shot up this month following a surprise cut in production announced by the producers’ cartel OPEC and its allies like Russia.

Commenting on the move, Sabyasachi Majumdar, senior vice-president and group head — corporate ratings, ICRA Limited, said there was a moderation in crude oil prices closer to the last revision in special additional excise duty (SAED) on March 21, 2023, hence the reduction in the duty.

“However, crude oil prices have jumped since the OPEC+ announcement of additional production cuts of 1.16 million barrels per day. Hence, the SAED can be expected to increase in the next revision if the crude prices remain elevated,” he said.

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

The government’s collection from the SAED imposed on the production of crude oil and the export of petroleum products from July 1, 2022, is estimated at around Rs 40,000 crore in FY2023. — PTI

Softening global prices key reason

• The levy on crude oil produced by companies such as ONGC has been reduced to nil from Rs 3,500 per tonne ($5.8 per barrel), the order dated April 3 said
• Alongside, the government cut the tax on the export of diesel to Rs 0.50 per litre from Re 1, and the same on overseas shipments of ATF remains at nil
• The new tax rates come into effect from April 4, the order said. The levy was cut in line with the softening trend seen in international oil prices in the second half of March