The government on Saturday raised the windfall tax on domestically produced crude oil by more than a third while doubling the rate on diesel exports and reintroducing the tax on shipping jet fuel abroad ( ATF) in line with the increase in international oil prices.
The tax on crude oil produced by companies such as the state-owned Petroleum and Natural Gas Corporation (ONGC) was increased to $11,000 per ton from October 16, $8,000, a government notice showed.
In the fortnightly revision of the tax on extraordinary profits, the government doubled the rate on the export of diesel to $12 per liter of $5 liter. The levy on jet fuel, which was reduced to zero earlier this month, was reintroduced at $3.50 a liter.
The tax on diesel includes $1.50 per liter of road infrastructure cessation (RIC), the notification showed.
The rise reverses the reduction in two previous rounds in September.
This follows the rise in international oil prices. India’s crude import basket rose to $92.91 a barrel in October from an average of $90.71 in the previous month. The basket had averaged $116.01 in June, which was used as the basis for introducing the levy for the first time from July 1.
When the levy was first introduced, a windfall profits tax was also imposed on the export of gasoline, along with diesel and ATF. But the gas tax was removed in subsequent biweekly reviews.
While the windfall tax is calculated by removing any price producers get above a threshold, the levy on fuel exports is based on the gaps or margins refiners make on overseas shipments. Most of these margins come from the difference between the real price of oil on the international market and the cost.
The international price of gasoline, which was used as a benchmark for the export windfall tax levy, was $148.82 a barrel in June but has since fallen to $91.37 this month. It had averaged $93.78 a barrel in September.
In contrast, the international price of diesel has firmed up to USD 133.35 per barrel in October from USD 123.36 the previous month. The rate was USD 170.92 per barrel in June.
International oil prices fell to pre-Ukraine war levels last month but rose this month as the OPEC producer cartel and its allies cut output.
While private refiners Reliance Industries Ltd and Rosneft-based Nayara Energy are the main exporters of fuels such as diesel and ATF, the extraordinary tax on domestic crude targets producers such as state-owned ONGC and Oil India Ltd. as well as private players such as Vedanta Ltd.
India put windfall taxes on energy companies for the first time on July 1. This makes India one of a growing number of countries that do this. At that time, the export duties of $6 per liter (USD 12 per barrel) were applied to gasoline and aviation turbine fuel and $13 a liter (USD 26 a barrel) to diesel. A $A windfall tax of 23,250 per tonne ($40 per barrel) was also imposed on domestic crude production.
Tariffs were partially adjusted in the previous rounds on July 20, August 2, August 19, September 1, September 16, and October 1.
The adjustments, although still ad hoc, highlight the producer oil price cap of around USD 75 per barrel and a return of USD 20–22 per barrel.