Government eases windfall tax on fuel shipments and crude output, kills gasoline export levy

The government has eliminated a levy on gasoline exports, and cut windfall taxes on other fuels less than three weeks after they were imposed. The step offers relief for top fuel exporter Reliance Industries and top crude explorer Oil & Natural Gas Corp.

The Centre reduced the windfall tax on diesel and aviation fuel shipments by Rs 2 per litre and scrapped completely a Rs 6 per litre levy on gasoline exports, according to a government notification.

Also Read: Windfall tax review more likely than expected after sharp fall in global crude oil prices

The government has cut the Special Additional Excise Duty on crude oil production to Rs 17,000 per tonne from Rs 23,250. The special duty on aviation turbine fuel has been cut to Rs 4 per litre from Rs 6 per litre, according to a gazette notification.

The additional excise duty on petrol and high speed diesel has been reduced to zero from Rs 1 per litre. Petrol, high speed diesel and ATF exported from special economic zones will be hereon be exempted from the special additional excise duty. The changes are applicable from July 20.

This comes in the wake of reports that the Centre is considering lowering the recently implemented windfall tax as profits of fuel exporters and oil producers are dwindling.

Also, a recent report pointed out that a massive crash in refining margins of diesel, petrol and jet fuel has diminished the super profits of refiners. "We see a good chance for windfall tax relief in one of the subsequent reviews this quarter,” brokerage CLSA had said.

While the windfall tax on domestic crude oil production was seen hitting state-owned Oil and Natural Gas Corporation’s (ONGC) earnings severely, the export duties could shave off up to USD 12 per barrel in refining margins for Reliance, which had in recent months ramped up fuel exports to capture demand in Europe and elsewhere.

Stating that windfall tax review was more likely than expected, CLSA said in the last few days have seen a reasonably large fall in crude prices as well as spreads for key refined products on the back of rising worries over oil demand as recession fears grow.

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