India cuts windfall tax on crude production to nil

India has cut all windfall tax on crude oil from 3,500 rupees ($42.56) per tonne. The windfall tax on diesel was cut to Rs 0.50 per litre from Rs 1 previously.

As on April 4, only diesel carries a windfall tax while crude, ATF & petrol will not attract any such levies. India had in July imposed the windfall tax on crude oil producers and levies on exports of gasoline, diesel and aviation fuel after private refiners wanted to make gains from robust refining margins in overseas markets, instead of selling it at home.

Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel (ATF).

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

Reliance Industries Ltd, which operates the world’s largest single-location oil refinery complex at Jamnagar in Gujarat, and Rosneft-backed Nayara Energy are primary exporters of fuel in the country.

India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of Rs 6 per litre (USD 12 per barrel) each were levied on petrol and ATF and Rs 13 a litre (USD 26 a barrel) on diesel.

The export tax on petrol was scrapped in the very first review and that on ATF was done away with at the last review on March 4.

The government levies tax on windfall profits made by oil producers on any price they get above a threshold of USD 75 per barrel.

The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.