: Windfall tax on fuel export, domestic crude oil cut #finance #StockMarketNEWS #Business Press Trust of India New Delhi The government on Wednesday scrapped a windfall tax on the export of petrol

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Windfall tax on fuel export, domestic crude oil cut #finance #StockMarketNEWS #Business
Press Trust of India

New Delhi

The government on Wednesday scrapped a windfall tax on the export of petrol and cut the levy on overseas shipments of diesel and ATF as well as on domestically produced crude oil following a decline in global oil prices.

While the ` 6 a litre export duty on petrol was scrapped, the tax on the export of diesel and jet fuel (ATF) was cut by ` 2 per litre each to ` 11 and ` 4 respectively, government notifications showed.

The tax on domestically produced crude was also cut to ` 17,000 per tonne from ` 23,250, a move that will benefit state-owned Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd.

Also, correcting the anomaly that crept in when the windfall taxes were slapped on July 1, the government exempted fuel exports from refineries located in export-focused zones from the levies.

The move will benefit Reliance Industries whose exports had become uncompetitive due to the export levies that were as high as per barrel.

Reliance shares closed 2. 47% higher at ` 2,501. 40 a piece on the BSE. The stock of ONGC rose 4% to`132. 55, while Vedanta stock closed 6. 22% higher at `253. 45 a piece.

India imposed windfall taxes on July 1, joining a growing number of nations that taxes super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.

International crude prices slumped on concerns of a potential global recession, which was mirrored in cracks or margins on diesel, petrol and ATF falling.

The July 1 export duties of ` 6 per litre on petrol and ATF translated into per barrel, while ` 13 a litre tax on diesel was equivalent to a barrel. The ` 23,250 per tonne windfall tax on domestic crude production equalled per barrel.

The realised spread on petrol after considering the tax was near a loss-making level of just per barrel, while the diesel spread too was a meagre sum. For oil producers, the windfall levy, which was separate from the royalty and cess they continue to pay, took away 40% of their earnings.

This as, petrol cracks have dipped to per barrel in July from . 6 in June (currently below per barrel), diesel cracks fell to . 9 from . 9 per barrel and Jet/kero cracks declined to per barrel from . 6.

The cut in windfall tax will benefit Reliance, which operates two oil refineries at Jamnagar, in Gujarat with one focused only on exports. 55% of its refining production comes from its export refinery.

“We estimate the gross refining margin (GRM) impact for Reliance could now decline to per barrel vs a potential -10 per barrel impact earlier,�? Citi said.