On Thursday, the government increased the windfall profit tax on diesel exports to Rs 7 per liter and reinstated an export tax on jet fuel, although it reduced the tax on locally produced crude oil to keep pace with softening rates.
According to a finance ministry announcement, the government increased the windfall profit tax on diesel exports at the third fortnightly review from Rs 5 per liter to Rs 7 per liter and introduced a Rs 2 per liter tax on ATF exports.
The government eliminated the ATF (Aviation Turbine Fuel) export windfall profit tax earlier this month.
Additionally, the levy on locally produced crude oil has been reduced from Rs 17,750 to Rs 13,000 per ton.
The tax on exports was increased when cracks or margins increased, but the tax on domestic oil production was decreased as global oil prices fell to their lowest level in six months.
On July 1, India introduced its first windfall profit tax, joining an increasing number of countries that tax energy companies' higher-than-average profits. The profit margins of both oil producers and refiners have declined since then due to the cooling of the global oil market.
On July 1, export taxes of Rs. 13 per liter for fuel and ATF and Rs. 6 per liter (USD 12 per barrel) for gasoline and ATF were imposed (USD 26 a barrel). On domestic crude output, a windfall profit tax of Rs 23,250 per ton (about $40 per barrel) was also imposed.
After that, on July 20, the first fortnightly review, the Rs 6 per liter export duty on gasoline was eliminated, and the Rs 11 and Rs 4 export taxes on diesel and jet fuel (ATF), respectively, were reduced by Rs 2 per liter. Additionally, the tariff on crude produced domestically was decreased to Rs 17,000 per ton.
Following a decline in refinery cracks or margins, on August 2, the export tax on diesel was reduced to Rs 5 per liter and that on ATF was eliminated. But in response to a little increase in global crude oil prices, the tax on domestically produced crude oil was increased to Rs 17,750 per ton.
The taxes on fuel exports were reviewed at the third fortnightly review, and it has been raised but that on domestically produced crude oil has been cut.
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 country's import costs.
From USD 26.18 billion in June, the trade deficit increased to USD 31.02 billion in July. The import bill is rising as a result of declining exports, rising commodity costs, a weak rupee, and these factors together. In July compared to the same month last year, imports increased by 43.59% while exports decreased by 0.76%.
Since then, the price of oil has dropped to below USD 95 per barrel, while cracks on diesel and ATF have increased
According to industry insiders, the government is attempting to uphold the notion of leaving some healthy margins, with both crude oil producers and refiners and taxing gains over and above that.
