India scraps windfall taxes on petroleum export after OPEC's decision to cut oil production
This comes after the oil exporting countries, including Saudi Arabia, Iraq and Russia, decided on Sunday to cut production by nearly 1.6 million barrels a day to stabilise the crude price.
NEW DELHI: A day after crude prices jumped sharply in the international market following the decision of OPEC (Organization of the Oil Exporting Countries) to cut oil production, the government on Tuesday decided to remove windfall taxes, or Special Additional Excise Duty (SAED), on the export of petroleum crude, petrol and Aviation Turbine Fuel (ATF).
However, the oil companies will have to pay Re 50 paise per litre on the export of diesel from the country.
According to a government notification, taxes on the export of petroleum crude was slashed to nil from Rs 3,500 per tonne and taxes on diesel was reduced from Rs 1 a litre to Re 50 paise. The government had already removed taxes on the export of petrol and aviation fuel.
This comes after the oil exporting countries, including Saudi Arabia, Iraq and Russia, decided on Sunday to cut production by nearly 1.6 million barrels a day to stabilise the crude price in the international market.
Subsequently, the Brent crude gained significantly by 6% yesterday (Monday) and today it was trading at $85.25 a barrel at 1 PM IST. Following the collapse of banks in the US and Europe, Brent Crude Future, the benchmark of crude price in the international market fell to a 15-month-low of around $70 per barrel.
Following the decision of OPEC, which produces about 30% of the world’s crude oil to cut oil production, Goldman Sachs lowered its end-2023 production forecast for OPEC+ by 1.1 million bpd and raised its Brent price forecasts to $95 and $100 a barrel for 2023 and 2024.
Market experts believe this move is likely to harm India as it would inflate India’s crude basket price and oil companies will incur losses on the sale of fuel.
Therefore, removing the windfall taxes on the export of petroleum products came as a big relief for oil-producing companies like Oil India Limited, ONGC, Reliance and Nayara Energy. Reliance Industries Ltd and Rosneft-backed Nayara Energy are primary exporters of fuel in the country.
According to the Union commerce ministry, India exported petroleum products worth $81,295 million to different countries this fiscal till January 2023. The government is estimated to have collected Rs 25,000 crore from windfall tax in the current fiscal.
India first imposed SAED on July 1, joining a growing number of nations that tax super normal profits of energy companies. At that time, it levied Rs 6 per litre on the export of petrol and ATF, and Rs 13 a litre on the export of diesel.
The government reviews the taxes fortnightly based on international oil prices.