The Finance Ministry late on Tuesday lowered the Special Additional Excise Duty (SAED), better known as windfall gain levy on domestically produced crude, to ₹9,050 a tonne from ₹12,100. The change will take effect on October 18.
This decision has been taken as crude prices saw some moderation earlier. The reduction will likely impact oil exploration companies such as ONGC and Oil India.
Similarly SAED or duty on the export of diesel will decrease to ₹4 per litre from ₹5 per litre currently. The duty on jet fuel or ATF has been lowered to ₹1 per litre effective Wednesday, from ₹2.50 per litre, according to a Finance Ministry notification. Export-bound petrol will continue to be in NIL category. Product prices have come down, which is why 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.
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.
