The Centre announced fresh modifications in fuel export charges on Friday, including a Rs 3 per litre windfall profits tax on petrol exports. The announcement came mere hours after petrol and diesel prices were hiked by Rs 3 per litre in the domestic market amid the Iran war. A Finance Ministry notification also outlined a significant reduction of export duties on diesel and aviation turbine fuel (ATF) — with the latest changes coming into force from May 16.
A windfall tax is levied when corporations make abnormally high profits due to exceptional conditions, such as a sudden increase in global commodity prices.
As per a report by PTI, currently exports of petrol will attract a special additional excise charge (SAED) of Rs 3 per litre. At the same time, the export tariff on diesel has been cut to Rs 16.5 per litre from Rs 23 per litre. The tax on aviation turbine fuel (ATF) has also been reduced from Rs 33 a litre to Rs 16 a litre.
The Finance Ministry has said there will be no change in levies on petrol and diesel sold within the country. It also said that exports of petrol and diesel will remain free of road and infrastructure cess.
Shift to exports as crude prices rise
The current reduction comes against the backdrop of persistent volatility in international crude oil markets due to tensions in West Asia. The crude oil prices have crossed USD 100 per barrel in the past few days as against roughly USD 73 per barrel before the war erupted.
The government says the change in export duties aims to ensure there is enough fuel in the country and to discourage exports that are too high at a time when oil prices are high.
Crude prices were higher after the US and Israel initiated military strikes on Iran on February 28, which prompted retaliation from Tehran and fears of disruptions to global energy supply systems.
Will this impact fuel prices?
The recent revisions mostly relate to exports and are not expected to directly affect retail fuel prices as there have been no changes to tariffs on domestic fuel sales.
Before the latest hike in fuel prices, the Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited together were losing nearly Rs 1,000 crore a day, PTI said.
Analysts said the boost in retail fuel prices and the amended export tariffs may offer some relief to state-owned oil marketing corporations but profits remain under pressure due to high crude oil prices.
“This move was widely expected given the sustained rise in global crude prices and the financial strain on fuel retailers,” Radhika Rao, Senior Economist and Executive Director, DBS Bank told PTI.
