New Delhi –
The government has reduced the windfall tax for diesel exports by half and eliminated the ATF levy on jet fuel (ATF shipments).
However, it has increased the tax on domestically manufactured crude oil.
According to an official notice, Tuesday evening’s notification stated that the diesel export tax was reduced from Rs 11 to Rs 5.
The export of petrol will continue at nil tax
From Rs 17,000, the tax on domestically produced crude oils was increased to Rs 17,750 per tonne.
This will affect producers such as ONGC or Vedanta Ltd.
As India’s trade deficit grew to a new record, the tax cuts were made – the second time in two weeks.
These measures were taken hours after data revealed that India’s trade deficit soared to an all-time high in July.
This was due to higher commodity prices and a weaker rupee, which inflated India’s import bill.
From USD 26.18 trillion in June, the gap between imports and exports grew to USD 31.02 Billion in July.
This is due to a fall in exports and higher commodity prices, along with a weak rupee. It has led to an increase in import bills.
Exports fell 0.76 percent, while imports rose 43.59% in July compared to the previous year.
India was the first country to impose windfall taxes.
It joined a growing number countries that taxed more than normal profits of energy companies.
However, international oil prices have dropped since then, which has eroded profit margins for both oil producers as well as refiners.
Export duties of Rs 6 per Liter (USD 12 Per Barrel) were levied for petrol and ATF, and a Rs 13 per litre tax was levied for diesel exports (USD 26 per Barrrel).
On domestic crude production, a windfall tax of Rs 23,250 per ton (USD 40/barrel) was also levied.
In the subsequent fortnightly review, July 20, the Rs 6 per litre export duty on petrol was removed and the tax on export of diesel (ATF), was reduced by Rs 2 per cent to Rs 11 and Rs 4 respectively.
The tax on crude domestically produced was also reduced to Rs 17,000 per ton.
The export tax on diesel or ATF has been reduced due to a decrease in the margins and cracks of refineries.
However, the levy on domestically-produced crude oil has been increased in response to a slight increase in international crude oil prices.
Prashant Vasisht (Vice President, Corporate Ratings), Icra Limited stated that “the tinkering with the export duties is based on the movement of cracks spreads onto these products,
which are elevated but volatile due geopolitical situations, lockdown news and inventory levels, demand fluctuations, etc.”
The windfall tax on crude oil production was also increased, but only marginally, given the global crude oil price trends.
He said, “Though it is true that tinkering with these rates often creates its own uncertainty but, considering the high prices (crude price consistently above USD 100/barrel crack spreads diesel above USD 30/barrel etc),
a number countries have imposed windfall tax and accordingly, India isn’t the only country to do this.”