The Centre may soon cut windfall taxes on locally-produced crude and exports of diesel further, taking into account the recent decline in global crude prices and refining spreads.
The third review of the new taxes, imposed since July 1, is expected soon, sources told FE. The tax was slapped to rein in inflation and ensure adequate availability of the transport fuels in the local market.
The taxes is supposed to move either way, depending on crude prices and the refining spread. Brent crude, which was around $100-103/barrel on August 2, declined to $91.51 in intraday trade on Wednesday, the lowest since February. However, the third review will capture the decline in crude prices during August 1 and 15.
In the second review of the taxes on August 2, the government limited the windfall tax on diesel shipments to just Rs 5/litre and the tax on ATF was removed. However, it had raised the new additional excise duty (cess) on petroleum crude marginally from Rs 17,000 to Rs 17,750 per tonne, as the trade parity prices followed by domestic oil producers like ONGC and OIL rose marginally since mid-July, in line with the global crude prices.
In the first review on July 20, the Centre scrapped a Rs 6/litre export duty on petrol and reduced the taxes on the export of diesel and jet fuel by Rs 2/litre each to Rs 11 and Rs 4, respectively. It also slashed the cess on domestically-produced crude oil to 17,000/tonne from $23,250, a move that would benefit state-tun ONGC, Oil India and Vedanta’s Cairn & Gas. It had also exempted SEZ exports from the windfall taxes.