Centre cuts windfall tax on oil producers; hikes duty on ATF, diesel exports

New Delhi: Windfall profit tax on local oil producers has been cut on expected lines but increasing the levy on jet fuel and diesel exports was a surprise as local markets are reasonably well-supplied, analysts said Friday. At the third fortnightly review, the government has increased the windfall profit tax on the export of diesel to Rs 7 per litre from Rs 5 a litre and brought a Rs 2 a litre tax on ATF exports. Earlier this month, the government scrapped the windfall profit tax on ATF (Aviation Turbine Fuel) exports. Alongside, the tax on domestically produced crude oil has been cut to Rs 13,000 per tonne from Rs 17,750. “India’s fortnightly revision in windfall tax for oil producers was in line with our expectations. “The increase in jet fuel and diesel export tax, which reflects the recent rise in refining margins, surprised us as local markets are reasonably well supplied,” Morgan Stanley said in a report. The decline in oil prices led to a downward revision in windfall taxes on domestic oil production from $31 per barrel to $22. “The adjustments, while still ad hoc, highlight producer oil price cap of $70-75 a barrel and profitability of $20-21 per barrel,” it said. The export tax on diesel and jet fuel was raised by $4 per barrel to $14 a barrel and $4, respectively, as refinery margins for these products have risen. Reliance Industries Ltd’s Gross Refining Margins (GRMs) under the new tax regime should be currently running at $14 per barrel and the upcycle in refining is expected to benefit Reliance and oil marketers, it said. 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. India first imposed windfall profit taxes on 1 July, joining a growing number of nations that taxes super normal profits of energy companies. But international oil prices have cooled since then, eroding the profit margins of both oil producers and refiners. On 1 July, export duties of Rs 6 per litre ($12 per barrel) were levied on petrol and ATF and a Rs 13 a litre tax on the export of diesel ($26 a barrel). A Rs 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 Rs 6 a litre export duty on petrol was scrapped, and the tax on the export of diesel and jet fuel (ATF) was cut by Rs 2 per litre each to Rs 11 and Rs 4, respectively. The tax on domestically produced crude was also cut to Rs 17,000 per tonne. On 2 August, the export tax on diesel was cut to Rs 5 a litre and that on ATF scrapped, following a drop in refinery cracks or margins. But the levy on domestically produced crude oil was raised to Rs 17,750 per tonne in line with a marginal increase in international crude prices. At the third fortnightly review now, the taxes on fuel exports has been raised but that on domestically produced crude oil has been cut. International oil prices have since then slid to below $95 per barrel but cracks on diesel and ATF rose. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.