Govt to recoup 3/4th revenue loss from windfall tax
Excise duty cut on petro, diesel would dent exchequer by Rs1 lakh cr annually
New Delhi: The windfall tax on oil produced within India and fuel exported overseas will make up for more than three-fourths of the revenue that the government lost when it cut excise duty on petrol and diesel to cool soaring inflation, industry sources said.
India on July 1 joined a select league of nations globally that have taxed windfall gains accruing to oil companies from soaring energy prices. The government slapped a Rs6 per litre tax on the export of petrol and jet fuel (ATF) and Rs13 a litre on the export of diesel effective July 1. Additionally, a Rs23,250 per tonne tax was levied on crude oil produced domestically. The tax on crude oil producers like Oil and Natural Gas Corporation (ONGC), Oil India Ltd and Vedanta Ltd alone will fetch the government Rs69,000 crore annually considering 29.7 million tonnes of oil production in 2021-22 fiscal (April 2021 to March 2022), two sources with knowledge of the calculations said.
For the remaining nine months of the current fiscal, the levy would get the government almost Rs52,000 crore if the tax remains in place till March 31, 2023. On top of this, the new tax brought in on the export of petrol, diesel and ATF would bring in additional revenue.
"India exported 2.5 million tonnes of petrol, 5.7 million tonnes of diesel and 797,000 tonnes of ATF during April and May. Even if these volumes fall to a third due to the new levy and other restrictions imposed, the government would still be richer by at least Rs 20,000 crore if the tax continues till March 2023," one of the sources said.
Reliance Industries Ltd (RIL) operates a 35.2 million tonnes a year only-for-exports oil refinery at Jamnagar in Gujarat and that refinery is expected to continue overseas shipments even with the new tax, the second source said.
Some exports are also expected from the firm's adjoining 33 million tonnes a year refinery that is meant to cater to the domestic market.
"Reliance has a fuel retailing joint venture with BP and that joint venture operates 1,459 out of 83,423 petrol pumps in the country. Even after meeting the full requirement of the 1,459 petrol pumps and selling some fuel to PSU retailers, it still would be left with exportable surplus," the source said.
Similarly, Rosneft-backed Nayara Energy operates a 20 million tonnes a year refinery at Vadinar in Gujarat. It has 6,619 petrol pumps whose full requirement would be less than about 12 million tonnes of petrol, diesel and ATF that the refinery produces annually. The two taxes together will accrue as much as Rs 72,000 crore or over 85 per cent of the revenue that the government lost from cutting excise duty on petrol and diesel, sources said.
The government had on May 23 cut excise duty on petrol by Rs 8 per litre and diesel by Rs 6 a litre to cool record inflation. These excise cuts, according to a statement made by Finance Minister Nirmala Sitharaman at that time, would dent the exchequer by Rs1 lakh crore annually.
For the remaining 10 months of the current fiscal, the revenue foregone was about Rs84,000 crore.
