- Government today slapped windfall tax and an export on crude oil producers impacting — ONGC, Vedanta group, Oil India, RIL and more.
- Shares of all these oil producing companies have crashed after the news with state-owned ONGC falling the steepest by over 11%.
- All because of the rising crude oil prices that has been going up since the Russia Ukraine war that fueled inflation in the country.
The government which has been on the ‘giving’ end of subsidies and tax cuts has suddenly changed tracks – by increasing GST slabs and pulling more under this umbrella. But it isn’t stopping there.
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Today, the finance ministry also slapped a much feared but expected windfall tax on crude oil producers of India – like state-owned ONGC, Vedanta group with its Barmer oil producing fields, Oil India and more.
It also brought in export oriented petroleum units like Reliance’s Jamnagar refineries – which import crude oil and export processed fuel – with an export tax. It was among the top losers in Sensex falling by over 6% – shaving off a massive ₹1.13 lakh crore off its market cap.
All the domestic crude oil producers have been gaining from the rise in international prices. Indian refiners too have been gaining by producing Russian crude that many international refiners are shying away from.
“Due to production quota, Chinese refining throughput is continuously under pressure. The European Union’s decision to completely phase out Russia’s petroleum products, which was around 1.2mbpd as per Reuters, is likely to keep product cracks higher,”’ said a report by Haitong on Reliance Industries before the tax was announced. However, these margins will not stay intact much longer.
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At the same time, another oil producer ONGC crashed 11.65%, even though many brokerages have been factoring in a windfall tax and its effects on this stock for months. Chennai Petroleum (down 7%), Mangalore Refinery and Petrochemicals (down 9%), Hindustan Oil Exploration (down 5.6%) were among the top losers too.
Oil India fell by over 6% in the morning trade and Vedanta too fell by 3% – pulling down the metals to oil group’s market cap by ₹4,192 crore to ₹78,804 crore as of 12:04 pm.
Common man vs crude producers & refiners Indian government which has maintained a neutral stance on the Russia-Ukraine war. It now seems to take away some of the gains that the companies have enjoyed, thanks to its international policies.
The Russian war has also changed the inflation economics for India – after fuel prices hit the roof. To slice off some of that pressure, in May, the government cut duties on petrol and diesel by ₹8 per litre and ₹6 per litre respectively to ease the burden on the common man.
It should also be noted here that the government had increased duties on both these products in the midst of the pandemic when crude oil prices hit rock bottom – indicating that these taxes and rollbacks are a way to manage the exchequer’s books.
