With global oil prices easing, the Centre on Wednesday slashed the windfall tax levied on crude oil producers, reduced the export tax on Aviation Turbine Fuel (ATF) and diesel and scrapped the duty on petrol exports.
On July 1, the government had levied fresh taxes on the export of petrol, fuel and ATF as well as the domestic sale of crude oil in view of runaway global prices, with a plan for a fortnightly review.
In the first such review, the cess of Rs. 23,250 per tonne on crude has been lowered to Rs. 17,000 per tonne. This cess was aimed at reining in windfall profits for local oil producers who sell output at international parity prices even to domestic refineries.
Similarly, the levies on export of ATF and diesel were both cut by Rs. 2 per litre, to Rs. 4 per litre and Rs. 13 per litre, respectively, while the levy of Rs. 6 per litre on the export of petrol was rescinded.
Also, exports of these fuels from units located in SEZs have now been exempted from duties, undoing the July 1 decision.
The duty tweaks, including the 27% cut in cess on domestic crude, would lead to a reduction in the fiscal windfall from these taxes, from about 0.37% of GDP, to about 0.2% of GDP this year, Nomura economists Sonal Varma and Aurodeep Nandi wrote in a note, adding that fiscal risks remained elevated.
“At the margin, the reduction in export duties on fuel should be positive for export growth,” they wrote, adding that concerns about a widening of the current account deficit (CAD) persisted.