The higher windfall tax on diesel and the surprising decision to re-introduce the levy on aviation turbine fuel will reduce the gross refining margin (GRM) of refiners to the extent of about $1.5 per barrel, analysts said.

While the cut in the profit tax on domestic crude production was along expected lines — because of the fall in global crude price and its corresponding reflection on the Indian basket — the hike on diesel and ATF surprised the analysts.

At the third fortnightly review on Thursday, the government increased the windfall profit tax on the export of diesel to Rs 7 per litre from Rs 5 a litre and brought a Rs 2-a-litre tax on ATF exports.

Earlier this month, the government had scrapped the windfall profit tax on ATF (aviation turbine fuel) exports. The Centre also reduced the tax on domestically produced crude oil to Rs 13,000 per tonne from Rs 17,750.

Prashant Vasisht, vice-president and co-head, corporate ratings, ICRA, said: “The windfall tax on crude, though reduced, remains negative for the upstream companies and would impact the EBITDA of the industry by about Rs 31,000 crore in FY2023.”

“For the downstream industry, the changes in the special additional excise duty would impact the overall GRMs of exporters by up to $1.5/barrel depending on their proportion of exports and the EBITDA impact on the industry is expected to be Rs 16,000 crore for FY2023.”

“India’s fortnightly revision in windfall tax was in line with our expectations. The increase in jet fuel and diesel export tax, which reflects the recent rise in refining margins, surprised us as local markets are reasonably well supplied,” Morgan Stanley said.

The decline in oil prices led to a downward revision in windfall taxes on domestic oil production from $31 per barrel to $22.

“Reliance Industries Ltd’s GRMs under the new tax regime should be currently running at $14 per barrel and the upcycle in refining is expected to benefit Reliance and oil marketers, it said.