ONGC, OIL rise up to 2.5% as govt cuts windfall tax on crude oil to nil

Govt cuts windfall tax to nil: On Tuesday, Centre scrapped windfall tax on crude oil from Rs 1,850 per tonne amid ease in oil prices

Shares of oil exploration companies gained in trade on Wednesday, bucking the tepid market sentiment, as the government removed windfall tax on domestically produced crude oil, effective September 18.

Individually, Abans Offshore share price advanced 2.5 per cent, Hindustan Oil Exploration, and Oil India share prices rose 1.9 per cent each, ONGC share price 1.2 per cent, and Selan Exploration 1.5 per cent. By comparison, the BSE Sensex was up 26 points at 83,100 level at 9:55 AM.

On Tuesday, Centre scrapped windfall tax on crude oil from Rs 1,850 per tonne amid ease in oil prices. This is the second time the government has cut windfall tax on crude oil to nil. Previously, on April 4, 2023, the centre had reduced it to zero.

Brent crude oil has declined over 20 per cent from its recent peak of $91 per barrel, to trade around $73 per barrel now. On a year-to-date basis, Brent crude oil has slipped around 5 per cent.

The decline in crude oil prices deepened recently as fears of a slowdown in the US economy, coupled with the persistent sluggish demand in China, surfaced.

Meanwhile, the practice to impose windfall tax on crude oil producers has been in place since July 2022. The Indian government reviews the windfall tax every fortnight, and the cut comes after a significant decline in crude prices.

Prior to the recent revision, the government had cut windfall tax on domestically produced crude oil to Rs 1,850 per tonne from Rs 2,100 per tonne on August 31. Before that, the government revised the windfall gains tax on petroleum products, reducing the levy on domestic crude oil to Rs 2,100 per tonne, down from Rs 2,400 per tonne on August 17.