The central government on Wednesday hiked the windfall profit tax on exports of diesel and Aviation Turbine Fuel (ATF). Besides, windfall gains tax on domestically-produced crude oil was also hiked in line with the hardening of global prices. The revised rates are effective today (1 September). At the fourth fortnightly review, the government raised the windfall profit tax on the export of diesel to Rs 13.5 per litre from Rs 7 per litre earlier, and on Aviation Turbine Fuel (ATF) exports to Rs 9 from Rs 2 per litre, according to a Ministry of Finance notification. The tax on domestically-produced crude oil too has been hiked to Rs 13,300 per tonne from Rs 13,000 earlier.
Rates hiked on oil price rise expectations
The government reviews windfall gains cess every fortnight, according to global crude oil prices. The Indian government first imposed the windfall taxes in July, joining a select league of nations globally that tax supernormal windfall gains accruing to oil companies from soaring energy prices. Earlier, the government said that the main objective behind imposing the windfall tax is to maintain domestic supplies, as refiners preferred to export over supplying to meet the local requirements. The tax on exports has been raised in the latest review as margins rose, while the levy on domestically-produced oil has been increased marginally on slight changes in international crude prices and on expectations of a price rise on hopes of a production cut by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies.
In the previous fortnightly review of windfall gains tax, the government cut the cess on crude oil, while the export duty on diesel and aviation turbine fuel (ATF) was hiked. The Union Ministry of Finance on 1 July had slapped an export tax on petrol and diesel after some refineries made super-normal profits from exports at the cost of domestic supplies, and imposed a Rs 66,000 crore windfall tax on crude oil produced locally. Since India first imposed windfall profit taxes on July 1, international oil prices have somewhat cooled, eroding the profit margins of both oil producers and refiners.
Windfall tax since July 1
On July 1, export duties of Rs 6 per litre were levied on petrol and ATF and a Rs 13 a litre tax on the export of diesel. A Rs 23,250 per tonne windfall profit tax on domestic crude production was also levied. Thereafter, in the first fortnightly review on July 20, the Rs 6 a litre export duty on petrol was scrapped and the tax on the export of diesel and jet fuel (ATF) was cut by Rs 2 per litre each to Rs 11 and Rs 4 respectively. The tax on domestically-produced crude was also cut to Rs 17,000 per tonne.
Later on August 2, the export tax on diesel was cut to Rs 5 a litre and that on ATF scrapped, following a drop in refinery cracks or margins. But the levy on domestically-produced crude oil was raised to Rs 17,750 per tonne, in line with the increase in international crude prices. In the third review on August 19, the export tax on diesel was hiked to Rs 7 per litre, while a Rs 2 per litre tax on ATF was reintroduced. The levy on domestic crude oil output was cut to Rs 13,300 per tonne, in line with the softening of crude prices. Now in the fourth fortnightly review that happened late Wednesday night, the taxes on diesel and ATF exports as also on domestically-produced crude oil have been raised.