A Bloomberg report has suggested that the Indian government is deciding to reduce the windfall tax as profits of fuel exporters and oil producers are dwindling due to the crash in global crude prices.
The measure, aimed at taxing super-normal profits on local oil production, export shipments of gasoline, diesel and jet fuel, will be reviewed at a meeting on Friday, as per the report. If a cut is decided upon, it could be implemented immediately.
Global oil prices have fallen about 20% in recent weeks on concerns of a US recession coupled with China’s struggle to move beyond a debilitating period of Covid curbs. Margins on diesel, gasoline and aviation fuel have crashed in the past two weeks, squeezing profits of India’s top fuel exporter Reliance Industries Ltd (RIL) and oil producer Oil and Natural Gas Corporation.
Export taxes on gasoline are likely to see the steepest reduction, while levies on diesel, jet fuel and crude oil could also be reduced to adjust the impact of price declines, the Bloomberg report suggested.
In a surprise move, the government on July 1 slapped export duties on petrol and ATF ( ₹6 per litre or USD 12 per barrel) and diesel ( ₹13 a lire or USD 26 a barrel) and imposed a windfall tax on domestic crude production ( ₹23,250 per tonne or USD 40 per bbl). At that time, the finance ministry stated that the taxes will be reviewed every fortnight.
The windfall tax is on oil producers that have benefitted from higher global crude oil prices. The govt has also mandated exporters to meet the requirements of the domestic market first. Domestic crude producers sell crude to domestic refineries at international parity prices. As a result, the domestic crude producers are making windfall gains.
(With inputs from Bloomberg)
