New Delhi
The Finance Ministry late on Thursday brought down windfall tax on domestically produced crude to zero from ₹1,800 a tonne. This is the second time the tax has been lowered to zero.
The central government, had with effect from the July 1, 2022, imposed certain duties /cesses on domestically produced crude petroleum. However, it may be noted that this tax has nothing to do with the domestic retail price because of two reasons.
One, share of domestic production is very low in overall crude requirement. Two, domestic companies command prices for their product at par with what foreign producers get. When they have windfall gains due to a rise in global prices, only then do they have to pay additional tax.
The decision to cut the windfall levy has been taken as brent crude oil prices that had been hovering around $73 per barrel earlier, fell below $70 per barrel this week, which is the lowest since December 2021.
Last week, Oil Secretary Pankaj Jain had said: “There is a calculation mechanism for that and it is from the Revenue Department. We are in continuous discussions with the Revenue Department, which will continue, which will take the final call. The final decision will be with the Revenue Department.”
With the reduction in crude prices, the expectation is building up for price cuts for petrol and diesel. According to Jain, the government is reviewing the recent decline in international crude oil prices. It will take a decision on reducing the retail prices of auto fuels only if the downward rally continues.
He also said that the oil marketing companies (OMCs) would consider a cut in retail prices if international prices of crude oil stay subdued for a longer duration. “In the last 7-10 days, crude oil prices have come down. At present, the Ministry is analysing the prices and how long they will stay low. It would not be appropriate to cut (retail prices) by following the developments within just a week. We need time to analyse this trend for a longer duration,” he added.