Petrol and Diesel Prices Drop: Relief for Motorists as Government Slashes Export Taxes

In a major announcement, the central government has provided good news for motorists across the country. Petrol and diesel prices are expected to drop substantially following the government’s decision to remove taxes on exports of these fuels. This decision, effective immediately, is set to bring cheer to the public and provide relief to oil-exporting companies.

HIGHLIGHTS

• Significant drop in petrol and diesel prices anticipated.
• Central government abolishes export taxes on fuel products.
• Move provides relief to oil-exporting companies like Reliance and ONGC.

The government has abolished the Windfall Tax on exports of petrol, diesel, aviation turbine fuel (ATF), and crude oil products. Introduced in July 2022 during a period of surging global oil prices, the tax aimed to curb excessive profits made by oil companies. The rates were revised every 15 days based on a two-week average of international oil prices.

With Brent crude currently trading between $72 and $75 per barrel, the government deemed it appropriate to eliminate the windfall tax. Additionally, it has also withdrawn the Road and Infrastructure Cess (RIC) on petrol and diesel exports. The move is expected to increase the gross refining margin (GRM) for companies like Reliance and ONGC, boosting their profitability.

Background on the Windfall Tax

The windfall tax was initially imposed when the Russia-Ukraine conflict and Western sanctions on the Kremlin caused crude oil prices to soar. This spike enabled oil companies to reap extraordinary profits, prompting the government to levy the tax to generate additional revenue. Over time, as global oil prices normalized, the government gradually reduced and eventually removed these taxes.

Positive Impact on Oil Companies and Stock Market

This decision is a significant relief for oil-exporting companies. Following the announcement, Reliance Industries’ shares traded higher at ₹1,300.05 by 1:04 PM on Monday. Experts suggest that the removal of these taxes could help stabilize the domestic fuel market while benefiting exporters.

Government’s Rationale

The government’s decision comes amid a steady decline in international oil prices. By eliminating these taxes, the government aims to foster a more favorable environment for oil exporters while potentially reducing the financial burden on consumers at the pump.

Key Highlights of the Policy Change

• Removal of Windfall Tax: Applicable to crude oil, petrol, diesel, and ATF exports.
• Withdrawal of Road and Infrastructure Cess: Further reducing costs for exporters.
• Immediate Effect: Consumers may soon see a direct impact on petrol and diesel prices.

Conclusion

This decision is expected to bring much-needed relief to consumers and businesses alike. As global oil prices stabilize, the move reflects the government’s adaptability to international market trends while ensuring economic benefits for exporters and motorists. Stay tuned for further updates on this development.