Finance Ministry cuts SAED on crude: Impact on ONGC, Oil India & major fuel exporters

The Finance Ministry on Thursday lowered the Special Additional Excise Duty (SAED), better known as windfall gain levy on domestically produced crude, to ₹6300 per tonne from ₹9800. The change has been made effective from Thursday, November 16.

This decision has been taken as crude prices saw some moderation earlier. This will likely impact oil exploration companies such as ONGC and Oil India.

SAED or duty on the export of diesel will decrease to ₹1 per litre from ₹2 per litre currently. The duty on jet fuel or ATF and petrol, bound for export, will continue to be NIL, according to a Finance Ministry notification. Product prices have come down, so windfall gain tax has been revised downward. Cutting the windfall levy on diesel and ATF for export will impact Reliance Industries and Rosneft-backed Nayara Energy as primary fuel exporters.

India first imposed windfall profit taxes on July 1, 2022. joining several nations that tax supernormal profits of energy companies. At that time, export duty of ₹6 per litre ($12/bbl) was levied on petrol and ATF, and ₹13 a litre ($26/bbl) on diesel. A ₹23,250 per tonne ($40/bbl) windfall profit tax on domestic crude production was also levied.

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

The domestic producers of petroleum crude, like ONGC, sell their crude at international parity price. As international crude prices rose sharply, these producers made super-normal profits. The prices of diesel, petrol, and ATF rose even more sharply, which led to extraordinary cracking margins (difference between the product price and the crude price) on exports of these products. The cess/duties were imposed in this background. As detailed above, these are being reviewed periodically, considering all relevant factors, including international prices.

• Read: Will oil hit $100? It already has in some markets

The government levies a tax on windfall profits from oil producers on any price above a threshold of $75 per barrel. According to the Finance Ministry, the data for Special Additional Excise Duty (SAED) on crude oil production is not maintained separately.

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