India hikes duty on domestic crude oil after windfall tax cut

The duty on domestically produced crude oil was raised on Tuesday evening after the government cut the windfall tax on diesel and ATF in line with the softening of international petroleum product prices.

The tax on diesel export was reduced to Rs 5 per litre from Rs 11, but on jet fuel ATF was scrapped, an official notification showed.

The export of petrol will be subject to a nil tax.

The tax on domestically produced crude oil has been hiked to Rs 17,750 per tonne from Rs 17,000, a move that will hit producers like ONGC and Vedanta Ltd.

India imposed windfall taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. Since then international oil prices have cooled, eroding profit margins at both oil producers and refiners.

On July 1, export duties of Rs 6 per litre USD 12 per barrel were levied on petrol and ATF and a Rs 13 a litre tax on diesel USD 26 a barrel. The Rs 23,250 per barrel windfall tax on domestic crude production, USD 40 per barrel was also levied.

In the first fortnightly review on July 20, the Rs 6 a litre export duty on petrol was scrapped, the tax on the export of diesel and jet fuel ATF was cut by Rs 2 per liter each to Rs 11 and Rs 4 respectively. The tax on domestically produced crude was reduced to Rs 17,000 per tonne.

The export tax on diesel and ATF has been cut due to a drop in refinery cracks or margins. The levy on domestically produced crude oil has been raised in line with the marginal increase in international crude prices.