Amid a recent fall in international oil prices and refining spreads, India on Thursday hiked the windfall profit tax on the export of diesel to ₹7 per litre and brought back a tax on jet fuel exports.
However, the government has slashed the levy on domestically produced crude oil in line with softening rates, a finance ministry notification showed.
At the third fortnightly review, the government raised the windfall profit tax on the export of diesel to ₹7 per litre from ₹5 a litre and brought a ₹2 a litre tax on jet fuel (ATF) exports.
Earlier in August, the government had scrapped the windfall profit tax on jet fuel exports. Alongside, the tax on domestically produced crude oil has been cut to ₹13,000 per tonne from ₹17,750.
Tax on exports raised
The tax on exports has been raised as cracks or margins rose but the same on domestically produced oil was reduced as international oil prices slid to a six-month low.
The government first imposed windfall profit taxes on 1 July, joining a growing number of countries that taxes super normal profits of energy firms. But global oil prices have cooled since then, eroding profit margins of both oil producers and refiners.
On 1 July, export duties of ₹6 per litre ($12 per barrel) were levied on petrol and ATF and a ₹13 a litre tax on the export of diesel ($26 a barrel). A ₹23,250 per tonne windfall profit tax on domestic crude production ($40 per barrel) was also levied.
Thereafter, in the first fortnightly review on 20 July, the ₹6 a litre export duty on petrol was scrapped, and the tax on the export of diesel and jet fuel was cut by ₹2 per litre each to ₹11 and ₹4, respectively. The tax on domestically produced crude was also reduced to ₹17,000 per tonne.
Thereafter, on 2 August, the export tax on diesel was cut to ₹5 a litre and that on ATF scrapped, after a drop in refinery cracks or margins. But the levy on domestically produced crude oil was raised to ₹17,750 per tonne in line with a marginal increase in global crude prices.
At the third fortnightly review, the taxes on fuel exports has been raised but that on domestically produced crude oil has been cut.
The reduction in taxes earlier in August came as the nation’s trade gap swelled to a record high last month as elevated commodity prices and a weak rupee inflated the country’s import bill.
The gap between exports and imports widened to $31.02 billion in July from $26.18 billion in June. This, as a result of exports falling and elevated commodity prices together with a weak rupee, are inflating the import bill. Imports surged 43.59% in July from the year-ago month, while exports dropped 0.76%.
Global oil prices have since then slid to below $95 per barrel but cracks on diesel and jet fuel rose.
India is reportedly working on a principle to leave some healthy margins, with both crude oil producers and refiners and taxing gains over and above that.
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