Sharp rise in windfall tax on oil refiners

The Modi government has again hiked the tax on windfall gains by domestic oil producers and refiners. It has increased the tax on the export of diesel to Rs 13.5 per litre from Rs 7 per litre and aviation turbine fuel (ATF) to Rs 9 from Rs 2 per litre from September 1.

It has also increased the tax on domestically produced crude oil to Rs 13,300 per tonne from Rs 13,000, according to a finance ministry notification issued late Wednesday night. Prashant Vashisht, vice-president of Icra, said: “The increase in windfall tax would result in the government getting additional Rs 32,000 crore revenue in FY23. It would lead to a fall in gross refining margins up to $2.5 per barrel.”

Sources said the government needs to develop a formula or bring in transparency in calculating the tax. The current methodology seems to be arbitrary and brings an element of uncertainty.