Centre raises levy on domestic crude oil

New Delhi: The government has halved the windfall tax on the export of diesel and scrapped the levy on jet fuel (ATF) shipments, but raised the tax on domestically produced crude oil. The tax on the export of diesel was cut to Rs5 per litre from Rs11, according to an official notification issued on Tuesday evening.

Export of petrol will continue to attract nil tax. The tax on domestically produced crude oil was hiked to Rs17,750 per tonne from Rs17,000, a move that will hit producers like ONGC and Vedanta Ltd. The cut in taxes - the second in as many weeks - came as India's trade gap swelled to a record. The measures come hours after data showed India's trade deficit ballooned to a record high in July, as elevated commodity prices and a weak rupee inflated the country's import bill. The gap between exports and imports widened to $31.02 billion in July from $26.18 billion in June. This, as a result of exports falling and elevated commodity prices together with a weak rupee, is inflating the import bill. Imports jumped 43.59 per cent in July from the year-ago month, while exports dropped 0.76 per cent.

India first imposed windfall taxes on July 1, joining a growing number of nations that taxes super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.

On July 1, export duties of Rs6 per litre ($12 per barrel) were levied on petrol and ATF and a Rs 13 a litre tax on the export of diesel ($26 a barrel). A Rs23,250 per tonne windfall tax on domestic crude production ($40 per barrel) was also levied. Thereafter, in the first fortnightly review on July 20, the Rs6 a litre export duty on petrol was scrapped, and the tax on the export of diesel and jet fuel (ATF) was cut by Rs2 per litre each to Rs11 and Rs4, respectively.