Export tax scrapped on jet fuel, reduced on diesel; raised on domestic crude

NEW DELHI: The government late on Tuesday night scrapped the export tax of Rs 4 per litre on jet fuel and reduced it on diesel by more than half from Rs 11 per litre to Rs 5, offering relief to exporters such as Reliance Industries Ltd and Rosneft-owned Nayara Energy as global benchmark product prices softened.
Simultaneously, the windfall tax on domestic crude was raised by Rs 750 per tonne to Rs 17,750, a move that will pare the gains from the recent uptick in global oil prices for state-run ONGC and Oil India Ltd as well as private producers such as Vedanta.
This is the second tweak since the levies were imposed on July 1 with the aim of discouraging private refiners from exporting without meeting domestic obligations amid fuel shortages in states where they had a substantial presence. Diesel was slapped with export tax of Rs 13 per litre, while a levy of Rs 6 per litre was imposed on outbound petrol and jet fuel shipments.
Domestic crude was slapped with a special additional excise duty (SAED) of Rs 23,230 per tonne to suck out what the government described as “phenomenal profits” producers were making from the surge in global oil prices since the Ukraine conflict broke out on February 24.
As the government retailers, which hold sway over 90% of the market, continued to sell below cost, the private players ramped up exports and curtailed domestic sales by starving outlets or charging Rs 3-5 per litre more to discourage retail sales and avoid losses.
As a result, state-run refiners had to import petrol and diesel to fill the void left by private players amid an unprecedented spike in demand even though they operated their refineries at full capacity.
“We don’t grudge people earning profits. But if oil is not being available (at petrol pumps) and they are being exported… exported with such phenomenal profits. We need at least some of it for our own citizens and that is why we have taken this twin-pronged approach,” finance minister Nirmala Sitharaman had said explaining the rationale of the tax.
On July 20, the export taxes were pruned following moderation in crude prices and a correction in ‘cracks’ — the price differential between crude and products, which brokerage Citi said had eased by $40-50 a barrel from a month before.
The levy on petrol was scrapped, while it was reduced to Rs 11 from Rs 13 on diesel and to Rs 4 per litre from Rs 6 on jet fuel. SAED on crude produced from domestic fields was also cut to Rs 17,000 per tonne from Rs 23,250.
Export tax was also scrapped on products shipped out from special economic zones, a major boost for Reliance as about half of its refining capacity qualified for the exemption.
Soon after the imposition of the levies, finance secretary Tarun Bajaj had said they will be reviewed every fortnight to keep them aligned with global benchmarks.

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