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 . 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 remain 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.
Sumit Singhania, partner, Deloitte India, said: “The withdrawal of windfall tax, except the reduced levy on diesel, is certainly a cheer for oil producing companies. Since it’s first levy in July 2022, windfall tax has made its impact felt on the oil companies’ economics and for the large part, this levy has been debatable despite it being arguably a positive step in net zero journey for a nation like India.”
“For now, the oil producing companies can heave a sigh of relief, but for how long would remain up for speculation.”
Sabyasachi Majumdar, senior vice-president and group head — corporate ratings, Icra, 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 cut 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.
Rupee trade
India’s Bank of Baroda has stopped clearing payments for Russian oil sold above the price cap set by the West from this month, three sources with direct knowledge of the matter said, a move that could expedite transition to a rupee trade mechanism.