Windfall tax on crude oil slashed to Rs 3,500/tonne, duty on diesel hiked

The Centre, late on Monday, slashed the windfall tax on locally-produced crude oil to Rs 3,500 per tonne from Rs 4,400 per tonne earlier. However, it hiked the export duty on diesel from Rs 0.50 per litre to Rs 1 per litre. 

Petrol and Aviation Turbine Fuel (ATF) have been exempted from the export levy. The new rates will be effective March 21. This is the second rate cut in March.

Earlier, on March 4, the Centre had slashed the windfall tax on the export of diesel to an all-time low of Rs 0.50 per litre. The levy on crude oil was hiked to Rs 4,400 per tonne from Rs 4,350 per tonne earlier. 

Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel (ATF).

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

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of Rs 6 per litre ($12 per barrel) each were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.

A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied.

The export tax on petrol was scrapped in the very first review.

The government levies a tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel.

The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.

(With agency inputs)