August8 , 2022

India may drop windfall tax if oil prices fall $40 a barrel: Report

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India will only withdraw its windfall tax introduced last week for oil producers and refiners if global prices of crude fall as much as $40 a barrel from present levels, Revenue Secretary Tarun Bajaj told Reuters on Monday.

The government on Friday imposed an export tax on petrol, diesel and jet fuel while also joining nations like the UK in imposing a windfall tax on crude oil produced locally.

The government slapped a 23,230 per tonne additional tax on domestically produced crude oil to take away windfall gains accruing to producers from high international oil prices, as domestic crude producers sell crude to domestic refineries at international parity prices. As a result, the domestic crude producers are making windfall gains.

The tax on firms that have increased product exports to gain from higher overseas margins took effect on July 1, as the government moves to boost domestic supply and revenue.

The taxes, and some accompanying export curbs, will hit the earnings of companies such as Reliance Industries (RIL), Nayara Energy, which is partly owned by Russia’s Rosneft , the Oil and Natural Gas Corp (ONGC), Oil India Ltd and Vedanta Ltd.

“The taxation would be reviewed every 15 days,” Bajaj said, adding that it would depend on international crude prices. “If crude prices fall, then windfall gains will cease and windfall taxes would also be removed.” The government believes such windfall gains will cease once prices fall $40 from existing levels, Bajaj told Reuters.

The government has introduced export duties for petrol, diesel and aviation turbine fuel (ATFs) on Friday to help boost domestic supplies, while also imposing a windfall tax on oil producers that have benefitted from higher global crude oil prices. It has also mandated exporters to meet the requirements of the domestic market first.

(With inputs from Reuters)

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