India increased the windfall profit tax on the export of diesel to $7 per litre on Thursday in response to a recent drop in global oil prices and refining spreads, and also reinstated a tax on the export of jet fuel.
To counteract softening rates, the government has reduced the tax on locally produced crude oil, according to a notification from the finance ministry.
The government introduced a Rs 2 per litre tax on jet fuel (ATF) exports and increased the windfall profit tax on diesel exports from Rs 5 to Rs 7 per litre during the third fortnightly review.
The administration had removed the windfall profit tax on the export of jet fuel earlier in August.
Additionally, the tax on crude oil that is produced domestically has been reduced from Rs 17,750 to Rs 13,000 per tonne.
While cracks or margins have increased, the tax on exports has been increased; nevertheless, the tax on locally produced oil has been decreased as global oil prices have fallen to a six-month low.
India introduced windfall profit taxes for the first time on July 1, joining an increasing number of countries that tax energy companies’ higher-than-average profits. However, since then, global oil prices have fallen, reducing the profit margins of both oil producers and refiners.
Petrol and ATF were subject to export tariffs of 6 pence per litre (USD 12 per barrel) as of July 1, while diesel was subject to a levy of Rs 13 per litre (USD 26 a barrel). A windfall profit tax of Rs 23,250 per tonne (USD 40 per barrel) was also imposed on local crude output.
After that, on July 20, the first fortnightly review, the export tax on gasoline was eliminated at Rs 6 per litre and the export taxes on diesel and jet fuel (ATF) were reduced by Rs 2 per litre to Rs 6 and Rs 4, respectively. Also reduced to Rs 17,000 per tonne was the tariff on domestically produced crude.
Following a decrease in refinery margins or cracks, the export tax on ATF was eliminated on August 2 and the duty on diesel was reduced to Rs 5 per litre. The tax on domestically produced crude oil, however, was increased to Rs 17,750 per tonne in accordance with a little increase in global crude oil prices.
The tax on fuel exports was increased at the third fortnightly review, although the tariff on domestically produced crude oil was decreased.
Taxes were cut earlier this month as India’s trade deficit increased to a record level in July as high commodity prices and a depreciating rupee increased the nation’s import costs.
The difference between exports and imports increased from USD 26.18 billion in June to USD 31.02 billion in July. The import bill is rising as a result of declining exports, rising commodity prices, and a weak rupee. July’s imports increased 43.59% over the same month last year, while exports decreased 0.76%.
Since then, global oil prices have fallen to below USD 95 per barrel, but cracks on diesel and ATF have increased.
According to industry insiders, the government is attempting to leave some healthy margins, taxing profits over that from both crude oil producers and refiners.
Aryan Jakhar works as an Editor-in-Chief at The Shining Media. Also, he is an editor at YouthPolitician (digital media situated in Taiwan). He writes his opinions on social issues at YouthKiAwaaz and also on his blogger website.