A government statement said India dropped the windfall tax on diesel and aviation fuel exports by 2 rupees per liter.
In response to lower oil prices, the government repealed a windfall tax on gasoline exports. Also reduced taxes on diesel, ATF, and locally produced crude oil. The export tax on diesel and jet fuel (ATF) has been reduced by Rs 2 per litre to Rs 11 and Rs 4, respectively.
Additionally, the tax on domestically produced oil was reduced from Rs 23,250 per tonne to Rs 17,000 per tonne, which would help the state-owned Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd.
On July 1, India put the windfall tax on oil producers and refiners that had increased exports to get more money from higher margins overseas. At that time, it also used the export tax. After taking into account the tax, the realised spread on petroleum was only about USD 2 per barrel, which was close to a loss. The diesel spread was also a small amount. The windfall levy, which was separate from the royalty and cess that oil producers still must pay, took 40% of their earnings.
International Oil Prices
Since mid-June, international oil prices have declined due to fears of a possible global recession, at one time wiping out all the gains that followed Russia’s invasion of Ukraine. In recent weeks, profits from processing gasoline and diesel in Asia have dropped. Industry consultancy FGE anticipates a further decrease in margins this quarter because of increasing supply.
The tax exemption will offer relief to the nation’s No. 1 fuel exporter Reliance Industries and top crude explorer Oil & Natural Gas Corp. The Company operates two oil refineries at Jamnagar, in Gujarat with one focused only on exports. 55 per cent of its refining production comes from its export refinery. Reliance and Rosneft-backed Nayara Energy Ltd., India’s only privately owned refiners, make up 80 per cent to 85 per cent of India’s overall gasoline and diesel exports.
