Domestically produced crude oil will not attract windfall gain levy with effect from Tuesday. At the same time, export bound diesel, petrol and jet fuel (Aviation Turbine Fuel) will continue to be under the ‘NIL’ regime, said the Finance Ministry in a notification on Monday.
Before this change, rate of windfall gain levy, technically known as Special Additional Excise Duty (SAED), was ₹4,100 per tonne.
This is second the time in 45 days when levy has been lowered to NIL because of fall in global crude prices. However, with pickup in demand and the consequent rise in prices, the government may reimpose the levy.
SAED is not applicable to entities whose annual crude oil production is less than 2 million barrels in the previous financial year. Continuation of NIL windfall levy on diesel, petrol and ATF for export will benefit primary exporters of fuel such as Reliance Industries and Rosneft-backed Nayara Energy.
India first imposed windfall profit taxes last July, joining a number of nations that tax super normal profits of energy companies. At that time, export duty of ₹6 per litre ($12/bbl) was levied on petrol and ATF, and ₹13 a litre ($26/bbl) on diesel. A ₹23,250 per tonne ($40/bbl) windfall profit tax on domestic crude production was also levied.
The tax rates are reviewed every fortnight based on the average oil prices in the previous two weeks.
The domestic producers of petroleum crude like ONGC sell their crude at international parity price. As international crude prices rose sharply, the crude oil producers were making super normal profits. The prices of diesel, petrol, and ATF rose even more sharply, which led to extraordinary cracking margins (difference between the product price and the crude price) on exports of these products.
The government levies a tax on windfall profits of oil producers when the price rises above $75 per barrel. According to the Finance Ministry, the data related to the Special Additional Excise Duty (SAED) is not maintained separately. The total collection of SAED is estimated at ₹25,000 crore for FY23.