The tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) was raised to ₹2,100 per ton from ₹1,700 per ton. Case. | photo credit: Reuters
The government has increased the windfall tax levied on locally produced crude oil as well as the export of diesel and ATF in line with firming international oil prices, according to an official order.
The tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) has been raised to ₹2,100 per ton from ₹1,700 per ton, according to the order dated January 2.
Crude oil pumped out of the ground and under the seabed is refined and converted into fuels such as gasoline, diesel, and aviation turbine fuel (ATF).
The government has also increased the export tax on diesel to ₹6.5 per liter from ₹5 and similarly on overseas shipments of ATF to ₹4.5 per liter from ₹1.5 per litre.
The new tax rates come into effect on January 3.
The tax rates were cut during the last fortnightly service on December 16, following a drop in world crude oil prices. International oil prices have since strengthened, necessitating an increase in the windfall tax.
India imposed windfall taxes for the first time on July 1, joining a growing number of countries that tax the super normal profits of energy companies. At that time, export duties of ₹6 per liter ($12 per barrel) each were levied on petrol and ATF and ₹13 per liter ($26 per barrel) on diesel.
A windfall tax of ₹23,250 per ton ($40 per barrel) on domestic crude production was also levied.
The export tax on gasoline has since been removed.
Tax rates are revised fortnightly based on average oil prices for the previous two weeks.
Reliance Industries Ltd, which operates India’s largest export-only oil refinery at Jamnagar in Gujarat, and Nayara Energy, backed by Rosneft, are the country’s main fuel exporters.
The government levies a windfall tax on oil producers on any price they get above a threshold of $75 a barrel.
The levy on fuel exports is based on the cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the realized international price of oil and the cost.