Steam billows from a crude oil refinery in Kochi, Kerala. File (representational image) | Photo Credit: AP
According to an official order, the government has increased windfall profit tax imposed on exports of domestically produced crude as well as diesel and ATF in line with firming international oil prices.
The February 3 order said the levy on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) has been increased from Rs 1,900 per tonne to Rs 5,050 per tonne.
Crude oil is extracted from the land and from the bottom of the sea, refined and converted into fuels such as petrol, diesel and Aviation Turbine Fuel (ATF).
The government has increased the tax on export of diesel from Rs 5 to Rs 7.5 per liter and on foreign shipments of ATF to Rs 6 per liter from Rs 3.5 per litre.
The new tax rates have come into effect from February 4.
The levy on both domestic crude oil and fuel exports is now at last month’s low.
Tax rates were cut in the last fortnightly review on January 17 after softening global oil prices. Since then international oil prices have firmed up, necessitating an unprecedented tax hike.
India imposed a windfall profits tax on July 1 for the first time, joining a growing number of countries that tax the super ordinary profits of energy companies. At that time, an export duty of Rs 6 per liter ($12 per barrel) was imposed on petrol and ATF and Rs 13 per liter ($26 per barrel) on diesel.
A windfall profit tax of ₹23,250 per tonne ($40 per barrel) was also imposed on domestic crude oil production.
Export tax on petrol was abolished in the very first review.
The tax rates are reviewed every fortnight based on the average oil prices in the preceding two weeks.
Reliance Industries Ltd., which operates the world’s largest single-location oil refinery complex at Jamnagar in Gujarat, and Rosneft-backed Nayara Energy are the primary exporters of the fuel in the country.
The government imposes a windfall profit tax on any price realized by oil producers above a cap of $75 a barrel.
The levy on fuel exports is based on the crack or margin that refiners earn on overseas shipments. These margins are mainly the difference between the price and cost of oil internationally.