Govt Reduces Windfall Tax on Crude Oil, Levy on Export of Diesel

Over 13% of the tax was reduced. The windfall tax, which is imposed as unique supplementary excise duty, is periodically updated to account for the super profits made by domestic crude oil companies.

“WTI Crude oil is trading around 1% higher in today’s early session after a 2.13% gain in the previous session. After a brief corrective two days in the previous week, crude oil is again regaining strength inching closer to the $90/bbl level. Crude oil which got support from bullish statements from OPEC on demand fronts has continued to rise. Oil also garnered support from the API inventory data that showed an unexpected drop in crude inventories. The focus will turn to today’s EIA Inventory data. If the EIA shows a similar drop in oil inventories the price rise might continue and the bulls might take the WTI crude oil price beyond the $90/bbl mark,” said Ravindra Rao, CMT, EPAT VP-Head Commodity Research, Kotak Securities Ltd.

However, the government increased the extra excise duty on the export of aviation turbine fuel from Rs 3.5 to Rs 5 per liter. The letter also noted an increase in the special extra excise duty on diesel export from Rs 12 to Rs 13 per liter.

The reduction in the windfall tax on the sale of domestic crude oil occurs when the price of oil in the world has generally stayed stable at $95 per barrel.

The January contract for Brent on the ICE was trading at $94.89 per barrel, up 2.24% from its previous finish, and the December contract for West Texas Intermediate (WTI) on the NYMEX was trading at $88.53 per barrel, up 2.31% from its previous close.

Given that China is the second-largest importer of crude in the world and that there have been discussions about restricting the price of Russian gas, supply concerns have persisted despite the recent Covid restrictions throughout several Chinese cities.

Weaker economic data from China and an increase in oil production in the US are expected to keep the prices subdued going ahead. The US Energy Information Agency (EIA) said that oil production in the US increased to almost 12 million barrels per day in August, reaching its highest level since the start of Covid-19.