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Frequent tinkering of windfall tax creates uncertainty: Experts
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IANS | 04 Aug, 2022
India
is not the only country to implement the windfall tax on domestic fuel
but frequent tinkering with the tax rates creates uncertainty, said
experts.
They also said while the policy is still ad
hoc, the last two revisions have been consistent with the move in global
oil and product prices.
"Though certainly tinkering these rates
frequently creates its own uncertainty, however considering the high
level of prices (crude prices consistently above $100/bbl, crack spreads
of gasoil above $30/bbl etc) a number of countries have imposed
windfall taxes and accordingly as a measure per se, India is not the
only country to implement this," Prashant Vasisht, Vice President and
Co-Head, Corporate Ratings, ICRA Limited said.
The windfall tax
on crude production has also been increased, though marginally
considering the international crude oil price trends.
He said the
export duties are changed on the basis of the movement of the cracks
spreads on these products which have been elevated but volatile due to
the geo-political situation, lockdown news, inventory levels, demand
fluctuations and others.
In line with its earlier announcement of
fortnightly review of windfall tax on fuel exports, the Indian
government has now scrapped export tax on aviation fuel and more than
halved the export tax on diesel to Rs5/litre (from Rs11/litre), said
Morgan Stanley in a report.
The government has increased the windfall tax on oil producers by $1/bbl (to $31/bbl).
"While
the policy is still ad hoc, the last two revisions have been consistent
with the move in global oil and product prices. There are now no export
taxes on gasoline and jet fuel and the remaining US$10/bbl export tax
on diesel has a minimal impact on most companies, including Reliance,"
Morgan Stanley said.
Morgan Stanley expects ONGC to get $75-80/bbl net crude realisation.
On its part the CLSA Ltd in its research report said diesel makes up about one-third of Reliance's refining production slate.
"As
clarified before, this tax will not be applicable on export-oriented
refining, which forms 55 per cent of production. It also sells a portion
of its diesel production in the domestic market. Taking these into
account, the impact of windfall tax on Reliance's overall refining
margin should now come down to just about US$1-1.5/bbl," CLSA said.
Recently,
the Indian government announced the levy of additional excise duty/cess
of Rs 6/litre on petrol and Rs 13/litre on diesel exports.
The
government also announced the levy of additional excise duty/cess of Rs
23,250/tonne on crude oil as special additional excise duty, since
domestic crude producers sell to domestic refineries at international
parity prices, and as a result, are making windfall gains.
Similarly in the case of aviation turbine fuel (ATF) exports, a special additional excise duty of Rs 6/litre was announced.
While
crude prices have increased sharply in recent months, the prices of
diesel and petrol have shown a sharper increase, the government had
said.
The government also said the tax will be reviewed every 15 days.
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As on 13 Aug, 2022 |
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