Centre slashes windfall tax on petrol, diesel, ATF as global oil prices drop

The Union Ministry of Finance on Friday (December 16) slashed the windfall profit tax levied on domestically-produced crude oil and on export of diesel and ATF following a drop in global oil prices.

The new tax rates are effective from December 16.

Also read: Windfall profit tax on crude oil hiked, levy on export of diesel cut

The levy on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) has been cut steeply to ₹1,700 per tonne from ₹4,900, a government order dated December 15 said.

Crude oil pumped out of the ground is refined and converted into fuel like petrol, diesel and aviation turbine fuel (ATF).

The government has also slashed the tax on the export of diesel to ₹5 per litre from ₹8 and the same on overseas shipments of ATF to ₹1.5 a litre from ₹5.

Also read: ONGC Q2 profit drops 30% to ₹12,826 cr on windfall tax woes

The reduction in tax rate follows a 14 per cent slump in global crude oil prices since November.

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of ₹6 per litre (USD 12 per barrel) each were levied on petrol and ATF and ₹13 a litre (USD 26 a barrel) on diesel.

A ₹23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied.

The export tax on petrol has since been scrapped.

Also read: FM defends windfall tax on crude, oil product exports

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

The basket of crude oil that India imports averaged USD 77.79 per barrel in December as against USD 87.55 last month. It averaged USD 91.70 per barrel in October.

Similarly, the price of diesel has also come down to USD 104.86 per barrel this month from USD 123.18 in November and USD 133.52 in October.

Also read: Biden paints oil firms as war profiteers, talks windfall tax

The government levies tax on windfall profits made by oil producers on any price they get above a threshold of USD 75-76 per barrel.

The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.

Also read: WPI inflation hits double digit as crude oil prices soar

(With inputs from agencies)