The Indian Oil Ministry has asked the country's Finance Ministry to consider scrapping the windfall tax on petroleum products due to falling crude oil prices, India's broadcaster ET Now reported exclusively on Monday, quoting sources.
The oil ministry has requested immediate withdrawal of the windfall tax on petroleum products in India, due to the recent slide in crude oil prices and the oil ministry's expectation that oil prices are set to go further down, ET Now reported.
The oil ministry has sent a number of presentations to the finance ministry, in which it says that oil companies are not making any windfall - or excessive - profits at crude oil prices below $80 per barrel.
A potential withdrawal of the windfall tax would help Indian producers such as Oil and Natural Gas Corporation (ONGC) and Oil India, ET Now's sources said.
India first introduced the windfall tax in July 2022, joining other governments in taxing the excessive profits of energy companies. India slapped the windfall tax on the country's oil producers and oil refiners who were exporting more due to the high international price of crude oil and refined products. The new taxes were aimed to serve as an incentive to keep more products at home and export less.
"As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market," a government-issued statement said at the time.
Since then, India has been reviewing the tax rates on crude oil and fuels every two weeks, based on the average oil prices in the past two weeks.
Apart from petroleum crude produced domestically, the government is taxing with a windfall tax gasoline, diesel, and aviation turbine fuel (ATF), too.
In the latest windfall tax revision, India slashed, effective August 1, the windfall tax on domestically produced crude due to lower international prices, and kept the windfall tax on petroleum products at zero.
By Charles Kennedy for Oilprice.com
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Comments
Over the course of a few months, I noticed that the financial performance of OMCs was being shown as very poor. On doing financial analysis, I found that the gross refining margin of all these companies is under pressure. The government is enjoying higher tax collection on petrol diesel but these companies are incurring huge losses or very thin margins. During the last 1-2 years, investors have lost confidence in oil marketing and refinery companies like IOCL, HPCL and BPCL. You know very well that the tax rates on petrol diesel in India are the highest in the whole world. Rate cuts and unnecessary price cuts are a major hurdle for OMCs. The Rs 2/- price reduction on petrol during the Lok Sabha elections in March 2024 has not been compensated till date. You are requested to please explain to the Honorable Prime Minister and Finance Minister that the inclusion of petrol diesel in GST has now become extremely important and necessary. If petrol diesel is not included in GST then oil companies will not be able to survive and will be ruined. Almost all the states of India are ruled by BJP. The BJP government has majority in the GST Council, states and Parliament. Therefore, no such excuse is acceptable that other parties do not agree on including petrol-diesel in GST. A decision will have to be taken on including petrol diesel in GST. The public does not accept this excuse that the state governments are not ready.
Regularization of price of Petrol Diesel on daily basis should be resumed soon.
Thanking you sir,
Sincerely,
Vinay Kumar