NEW DELHI: The government on Tuesday removed windfall tax, or Special Additional Excise Duty (SAED), on export of domestically produced crude oil and and halved the levy on the export of diesel to Rs 0.50 per litre.
According to a government notification, taxes on 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 50 paise. The government had earlier removed taxes on export of petrol and aviation turbine fuel (ATF). Cut in levy was in line with softening trend seen in international oil prices in the second half of March.
Meanwhile, 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 oil gained significantly by 6% ($85 a barrel) on Monday and on Tuesday it was trading at $85.74 a barrel at 7.12 PM IST.
Following the collapse of banks in the US and Europe, Brent Crude Future, the benchmark of crude index in the international market, fell to 15-month low of about $70 a barrel. Market experts believe this move is likely to have an adverse impact on the country’s economy as it would inflate the country’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 the oil producing companies like Oil India Limited, ONGC, Reliance and Nayara Energy. Reliance Industries and Rosneft-backed Nayara Energy are primary exporters of fuel in the country.
“Crude oil prices have jumped since the OPEC+ announcement of additional production cuts of 1.16 million barrels per day. Hence, the SAED can be expected to increase in the next revision if the crude prices remain elevated,” said Sabyasachi Majumdar, senior vice-President and Group Head - Corporate Ratings, ICRA Limited.
According to commerce ministry, India exported petroleum products worth $81,295 million 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 export of petrol and ATF, and Rs 13 a litre on export of diesel. The government reviews the taxes fortnightly on the basis of international oil price.
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