The Centre may trim Windfall taxes on domestic crude production as well as exports of diesel and jet fuel on Thursday given the moderation of refining margins in fuels and global crude prices.
In the fifth fortnightly review, the tax on crude may be trimmed as the Indian basket of crude has moderated to $92.53/barrel on an average so far in September compared with the August average of $97.4/barrel. “Benchmark Singapore gross refining margin (GRM) has been trading in the range of ~$8-12/bbl since August. Diesel cracks have been in the range of $25-50/bbl since last month. Petrol cracks were around $6-15/bbl while ATF cracks were around $25-50/bbl,” said ICICI Direct in a report on September 10.
The combination of volatile geopolitical worries, steady demand and refinery supply woes had kept GRMs elevated in Q1FY23, with benchmark Singapore GRMs at $21/bbl and a record $31.8/bbl for IOC during the period. “If the crude prices have cooled and refining margins are shrunk, it will reflect in the review,” an official told FE.
Also read| Windfall taxes on fuels, crude raised
In the fourth review on August 31, the government had raised the windfall taxes with the exports of diesel attracting a tax of Rs 13.5/litre, up from Rs 7 previously. Similarly, shipments of ATF were subjected to an impost of Rs 9/litre, up from Rs 2. The government has also raised the tax on domestically produced crude oil to Rs 13,300/tonne from Rs 13,000.
On July 1, the Centre imposed special additional excise duty of Rs 23,250/tonne on crude and export taxes on petrol, diesel and ATF at Rs 6/litre, Rs 13/litre and Rs 6/litre, respectively. The tax on petrol was removed subsequently.
The government’s rationale for introducing these taxes is to lay its hands on a chunk of the “windfall profits” reaped by some of the domestic firms, on the back of elevated global oil prices. The move is also aimed at addressing the crunch in the domestic fuel market, as private refiners neglected supplies to domestic retail outlets while tapping the highly remunerative export markets.