Export duty increase on refined oil products may recover loss from excise duty cuts

4 Jul 2022 , 09:16 AM

According to industry insiders, the government will recover more than three-fourths of the money it lost when it reduced the excise duty on gasoline and diesel to lower the skyrocketing inflation, through the windfall tax on export of domestically produced oil and refined petroleum products. 

India joined a narrow group of countries on July 1 that tax oil firms’ windfall earnings as a result of rising energy prices. As of July 1, the government levied taxes of Rs. 6 per liter on the export of gasoline and jet fuel (ATF) and Rs. 13 per liter on the export of diesel.

Additionally, locally produced crude oil was subject to a levy of Rs 23,250 per tonne.

According to two sources with knowledge of the calculations, the tax on crude oil producers like Oil and Natural Gas Corporation NSE -13.53 percent (ONGC NSE -13.53 percent), Oil India Ltd NSE -14.97 percent, and Vedanta Ltd NSE -4.06 percent alone will bring in Rs 69,000 crore annually, taking into account 29.7 million tonnes of oil production in the 2021—22 fiscal year (April 2021—March 2022).

If the tax is in force till March 31, 2023, it will bring in over Rs 52,000 crore to the government for the remaining nine months of the current fiscal year. Additionally, the increased tax imposed on the export of gasoline, diesel, and ATF would generate more money.