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The government has hiked the windfall profit tax on crude oil produced in the country and on export of diesel, while bringing back the levy on overseas shipments of ATF.
The tax, levied in the form of special additional excise duty, on domestically produced crude oil has been raised to ₹7,100 per tonne from ₹4,250 per tonne, according to an official notification.
Besides, the special additional excise duty (SAED) on the export of diesel has been increased to ₹5.50 per litre from ₹1 per litre. A duty of ₹2 per litre will be imposed on the export of jet fuel or ATF with effect from August 15.
There was no SAED on jet fuel prior to this levy. SAED on petrol will continue to be zero. The new tax rates come into effect from Tuesday, the Order dated August 14, said.
India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax supernormal profits of energy companies. At that time, export duties of ₹6 per litre ($12 per barrel) each were levied on petrol and ATF and ₹13 a litre ($26 a barrel) on diesel.
A ₹23,250 per tonne ($40 per barrel) windfall profit tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) was also levied. The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.
A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel.
Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products. International crude oil prices averaged $86.8 per barrel in August, up from $80.37 in the previous month and $74.93 a barrel in June.
The levy on domestic crude oil dropped to nil in the first half of April as international crude oil prices fell but was back in the second half in step with a rise in rates. Levy on diesel became nil in April but the levy was brought back in August. Levy on ATF became nil in March and has now been brought back. The export tax on petrol was scrapped in the very first review.
Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels such as petrol, diesel and aviation turbine fuel (ATF).
Reliance Industries Limited, which operates the world’s largest single-location oil refinery complex at Jamnagar in Gujarat, and Rosneft-backed Nayara Energy are primary exporters of fuel in the country.
