Levy on fuel exports slashed; govt exempts SEZs from windfall tax

The government on Wednesday exempted the export of petroleum products from units located in special economic zones (SEZs) from the windfall tax and slashed the export levies on these fuels amid easing global crude oil prices, less than three weeks after imposing them.

The move is expected to provide significant relief to Reliance Industries (RIL), whose 55 per cent of refining production comes from its two SEZ refineries at Jamnagar in Gujarat, from where a majority of products are exported. Other beneficiaries include the government-owned Oil and Natural Gas Corporation (ONGC) and Oil India.

“The central government, on being satisfied that it is necessary in the public interest to do so, hereby exempts the excisable goods, when exported from units located in SEZs,” a government notification said.

According to the notification, the government lowered the windfall tax on upstream oil production to Rs 17,000 per tonne from Rs 23,250 per tonne. It also scrapped the Rs 6-per-litre export tax on petrol and revised down the levy on diesel to Rs 10 per litre from Rs 13 per litre earlier, and on aviation turbine fuel to Rs 4 per litre from Rs 6 per litre.

JP Morgan in a report said the revision in taxes would result in revenue foregone of Rs 67,600 crore.

Moody’s had earlier estimated that the government might generate Rs 94,800-crore revenue from the windfall tax after it was imposed on July 1.

“It was announced earlier that windfall tax gains will be reviewed. So we have reviewed and rationalised the levy,” Finance Secretary T V Somanathan told reporters outside North Block.

The Centre had earlier announced that it would review the windfall tax every 15 days.

CLSA in an analyst report said the government’s clarification that SEZ units would now be exempt from the windfall tax was a positive for Reliance. “This will also ensure that the government’s export-friendly image is not hurt. With this clarification as well as the windfall tax cut, our bottom-up calculation shows the (impact on) refining margin of Reliance falling from $10-11 per barrel to $3-4 per barrel,” it added.

The RIL stock surged 2.5 per cent to Rs 2,501 per share on the BSE on Wednesday.

According to industry experts, though the cess imposed on crude oil has been reduced, it remains quite steep at about $30 per barrel and is likely to adversely impact the EBITDA of the Indian upstream industry by about Rs 39,000 crore for FY23.

“We expect the capex plans of the incumbents would remain largely intact owing to the still remunerative realisations of $70-90 a barrel for crude (net of cess). The special additional excise duty imposed on export of diesel and ATF, though reduced, remains negative for the non-SEZ situated exporters of these products and would adversely impact the realisations on export sales,” said Prashant Vasisht, vice president and co-head, corporate ratings, ICRA.

(Shine Jacob contributed to this story)

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