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Informist, Tuesday, Sep 17, 2024

 

--Govt removes windfall gains tax on domestic crude oil 
 

NEW DELHI – The government has removed the windfall gains tax on domestically produced crude oil, the finance ministry said in a notification today. On Aug 31, the government had lowered the windfall gains tax on domestically produced crude oil by 250 rupees a tn to 1,850 rupees a tn. The change in the tax will be effective Wednesday.

 

The cess on diesel exports, aviation turbine fuel exports, and petrol remained unchanged at nil.

 

Oil Secretary Pankaj Jain said last week that the Ministry of Petroleum and Natural Gas was in discussions with the finance ministry regarding the review of the windfall tax. The finance ministry has previously said that the windfall tax would be removed if crude oil prices fall below $70 per barrel. Brent crude oil futures traded near $68-$77 per barrel in the last fortnight, compared to $75-$80 per bbl in the previous two weeks.

 

The government had last removed the windfall gains tax on domestic crude oil in May last year, before it was reimposed in July.

 

Jain also said oil companies will consider lowering petrol and diesel prices if crude oil prices remain low for an extended period.

 

This is the 50th revision in windfall gains tax since it was first imposed in July 2022. These taxes, which are in the form of a cess, are for taxing supernormal gains of oil producers and fuel exporters. The government reviews these taxes on a fortnightly basis of oil prices and fuel margins in the international market.

 

When the government had first levied the cess on domestic crude, it was 23,250 rupees per tn, and translated to around $40 a bbl. The cut in windfall gain taxes comes as a positive for upstream oil companies such as Oil and Natural Gas Corp Ltd, Oil India Ltd, and Vedanta Ltd.

 

These levies were first imposed on Jul 1, 2022, to tax the windfall profits of crude oil producers and fuel exporters due to high oil and fuel prices globally. While taxes on petrol exports were also imposed initially, they were reduced to nil from Jul 20, 2022, and have not been hiked since.

 

The government had imposed the levies on fuel exports after fuel pumps in some parts of the country faced supply shortages, partly due to private sector refiners reducing domestic sales of petrol and diesel in favour of significantly more lucrative exports. Private fuel retailers Reliance Industries Ltd and Nayara Energy reportedly reduced domestic retail sales due to heavy under-recoveries.

 

As for domestic crude oil, upstream oil companies were raking in massive profits due to the surge in global oil prices in the aftermath of Russia's invasion of Ukraine in 2022. Indian oil producers price crude oil in line with global prices.  End

 

US$1 = 83.75 rupees

 

Reported by Shubham Rana

Edited by Aditya Sakorkar

 

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