look news india
The central government has taken a major policy step amid the ongoing fluctuations in the global energy market. To balance the profits from domestic crude oil production and refining, the government has revised the rates of Windfall Tax. Under this new decision, the tax on export of diesel and aviation fuel (ATF – Aviation Turbine Fuel) has been increased. However, it is a matter of relief for the common drivers of the country that there has been no change in the tax on petrol.
Why increased tax on diesel and aviation fuel
The government has taken this step in view of the rise in crude oil prices in the international market and increase in refining margins. According to the official notification, the Special Additional Excise Duty (SAED) on the export of diesel has been increased. Along with this, tax on export of fuel used in airplanes i.e. ATF has also been increased. The main objective of the government is to ensure adequate supply of fuel in the local market and to get a part of the windfall gains earned by the oil companies as revenue.
Tax on petrol remains as it is
The biggest relief in this entire tax amendment has been regarding petrol. The government has maintained the tax on export of petrol at zero. This decision will not have any direct impact on the retail prices of petrol in the domestic market, which is a big relief for the common consumers. Experts believe that the government wants to keep retail inflation under control at this time, hence petrol has been kept out of this increase.
What will be the impact on companies like Reliance and ONGC?
The direct impact of this decision of the government can be seen on the country’s big oil producing and refining companies like Reliance Industries Limited (RIL), ONGC and Oil India. Due to increase in windfall tax, there may be some pressure on the export margins (profits from exports) of these companies. However, since this tax applies only to fuel sent abroad, it is unlikely to have any negative impact on the profits of government oil companies (IOCL, BPCL, HPCL) selling oil in the domestic market.
What is windfall tax and why is it imposed?
In simple words, windfall tax is a special tax that is imposed on a company or industry when they suddenly get huge and unexpected profits due to some external circumstance. When international crude oil prices started skyrocketing due to the Russia-Ukraine war and global geopolitical tensions, Indian refining companies made huge profits by selling fuel abroad. To regulate this profit, the Government of India had implemented windfall tax for the first time in July 2022, which is reviewed every 15 days.