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

On Wednesday, the government unexpectedly raised taxes on domestically produced crude oil while cutting diesel exports.

The tax on crude oil produced by companies such as the state-owned Oil and Natural Gas Corporation (ONGC) was raised to 10,200 euros per ton, from 9,500 euros per ton, as of November 17, according to a government notification.

In the fortnightly review of the windfall profits tax, the government cut the diesel export rate to 10.5 rupees per liter, from 13 rupees per liter. The diesel tax includes €1.50 per liter of road infrastructure taxes.

The export tax on jet fuel or ATF, which was set at $5 per liter in the last revision on November 1, has not changed.

When the tax was first introduced, the export of gasoline was unexpectedly taxed along with diesel and ATF as well. But the tax on petrol was abolished in subsequent fortnightly reviews.

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While the windfall profit tax is calculated by excluding any price that producers cross a certain threshold, the tax on fuel exports depends on the slits or margins that refiners earn on overseas shipments. These margins are basically the difference in achieved world oil prices and costs.

India imposed windfall profits taxes for the first time on July 1, joining a growing number of countries taxing super ordinary profits of energy companies. At that time, export duties of $6 per liter ($12 per barrel) were imposed on gasoline and jet turbine fuel and 13 rupees per liter ($26 per barrel) on diesel. A windfall profit tax was also imposed on domestic crude oil production of 23,250 rupees per tonne ($40 per barrel).

Fees have been partially adjusted for previous rounds on July 20, August 2, August 19, September 1, September 16, October 1, October 16 and November 1.