The Finance Ministry has raised the Special Additional Excise Duty (SAED), better known as windfall gain levy on domestically produced crude, to ₹2300 per tonne from ₹1300. However, such levy on export-bound diesel and jet fuel reduced to NIL.
To date, windfall levies on diesel and jet fuel (Aviation Turbine Fuel or ATF) were ₹0.50 and ₹1. All the changes are coming into effect from Tuesday. Such a levy on export-bound petrol will continue at NIL.
This decision has been taken as crude prices saw some rise earlier. This will likely impact oil exploration companies such as ONGC and Oil India. Product prices have come down, so the 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.