Windfall tax on domestic crude oil hiked

The windfall tax on domestically produced crude oil was hiked by the government on Wednesday, while the export of diesel was lowered.

The tax on crude oil produced by firms such as the state-owned Oil and Natural Gas Corporation ONGC was raised to Rs 10,200 per tonne from Rs 9,500 per tonne, with effect from November 17, a government notification said.

The government has cut the diesel export rate to 10.5 per litre, from Rs 13 per litre in the fortnightly revision of the windfall tax. The levy on diesel includes 1.50 per litre road infrastructure cess.

The export tax on jet fuel or ATF, which was set at Rs 5 a litre in the last review on November 1, has not been changed.

A windfall tax on the export of petrol was levied alongside diesel and ATF when the levy was first introduced. The tax on petrol was scrapped in subsequent fortnightly reviews.

The windfall profit tax is calculated by taking away any price that producers are above a threshold, but the levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are a result of the difference between the international oil price and the cost.

India imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. Export duties of 6 per litre 12 per barrel on petrol and aviation turbine fuel and 13 a litre 26 a barrel on diesel were levied at the time. A Rs 23,250 per tonne 40 per barrel windfall profit tax on domestic crude production was also levied.