The government has reimposed windfall tax on domestically produced crude oil with an impost of Rs 6,400 per tonne effective Wednesday, and scrapped the levy on diesel exports.
Petrol and aviation turbine fuel meant for exports continue to remain exempt from the levy.
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The Central Board of Indirect Taxes and Customs, part of ministry of finance, issued the notification on late Tuesday announcing about the change in its latest fortnightly review.
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The hike in the special additional excise duty (SAED) on domestic crude oil production follows the surge in oil prices by about 9% to $85 a barrel after the OPEC+ decided to cut oil production by 1.16 million barrels a day on April 2.
Windfall taxes are one-off levies meant to extract a share for the government from the super-normal profits of oil producers and fuel exporters made due to elevated global crude prices.
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The Centre had slashed the windfall tax (or SAED) on domestically produced crude oil to zero after moderation in crude oil prices in March 2023, and had halved the levy on diesel meant for exports to Rs 0.5 per litre in early April.
The windfall tax was imposed for the first time on July 1, 2022 following spike in oil prices post Russia-Ukraine conflict. The move was also aimed at addressing the crunch in domestic fuel market, as private refiners neglected supplies to domestic retail outlets while tapping the highly remunerative export markets.
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While the hike in SAED will increase government revenue, it will impact the oil companies as they will have to pay higher tax on the sale of domestically produced crude oil.
Prashant Vashisht, vice president and co-group head, ICRA, said that the agency expects government collections from the same to be in the range of Rs 15,000 crore for FY24.
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About 77.5% of crude oil is produced by state-run ONGC and OIL, while private firms have a share of about 22.5%. Of the total crude oil production of 25.4 million tonnes in India in FY23 till February 2023, ONGC produced 16.8 million tonnes and OIL produced 2.8 million tonnes.
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The Indian basket of crude oil prices recorded a high of $116/bbl in June 2022 before moderating to $78.54/bbl in March 2023. But it has risen again to an average of $85.59/bbl so far in April 2023.
