The government has no plan to impose an additional tax on profits of upstream oil companies, which have benefited from the rise in global oil prices because of the trade-parity pricing they follow, a top government official told FE. The UK and Hungary have recently imposed extra levies on oil companies in the form of the so-called “windfall tax”, in a bid to generate more fiscal resources, leading to speculation that India may follow suit.
Levying such a “windfall tax” is inconsistent with the government’s stated policy of having a stable tax regime, the source said. Also, the government would want the oil companies to step up their capital expenditure, rather than pay more taxes, the official added. Analysts reckon that windfall tax will not only dent the stability of the tax regime, but on a net basis may not yield much revenue gain for the government because it will lead to reduced dividend income from state-owned oil companies.
The government has taken several steps in recent years to make tax rates benign and tax policy stable and predictable. The country’s tax policies are also being aligned with the best global practices and the OECD norms, with a view to attracting more foreign investments and making Indian industry and firms more globally competitive. The Russia-Ukraine war has led to sharp rise in prices of key commodities, including oil and gas.
The price of Indian basket of crude oil has advanced 8.6% over the last one month to close Thursday’s session at $ 115.17 per barrel. Barring April, the crude prices have surged in every month since December last year, clocking an average monthly increase of a little over 11%. As a result, state-run and private-sector oil producers have seen their margins going up. ONGC’s net profit rose to 15,784 crore in Q4FY22 against11,637 crore in Q3, while Oil India saw its profits jump sequentially from 1,522 crore in Q3 to2,527 crore in Q4.