The shares of Reliance Industries and stateowned exploration firm ONGC and Oil India surged as the government reduced the windfall profit tax levied on domestically-produced crude oil as well as on the export of diesel and ATF, in line with softening international oil prices.
The levy on crude oil has been cut to Rs 1,900 per tonne from Rs 2,100 per tonne, the order dated January 16 said. The RIL stock closed at Rs 2,478.55, up Rs 33.85, or 1.38 per cent, over Monday’s close. The ONGC scrip touched a high of Rs 149 before closing at Rs 147.85, up Rs 0.25 or 0.17 per cent.
The Oil India stock closed at Rs 225.70, up Rs 0.60 or 0.27 per cent over Monday’s close. Crude pumped out of the ground and from below the seabed is refined and converted into fuel such as petrol, diesel and aviation turbine fuel.
The government has also reduced the tax on the export of diesel to Rs 5 per litre, from Rs 6.5 and overseas shipments of ATF to Rs 3.5 a litre, from Rs 4.5 a litre. The new tax rates are effective from Tuesday. Windfall profit tax on domestically-produced crude oil is the second lowest since the levy was introduced in July.
The tax had fallen to Rs 1,700 per tonne in the second fortnight of December. The levy on the export of diesel now equals the lowest hit in the first half of August and October and the second half of December.
Tax rates were increased at the last fortnightly review on January 3, following a firming up of global oil prices. International oil prices have since then dropped, necessitating the reduction of a windfall tax. India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies.
The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks. RIL, which operates the world’s largest single-location oil refinery complex at Jamnagar in Gujarat, and Rosneft-backed Nayara Energy are the primary exporters of fuel in the country.