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Crude price drop sets tone for windfall tax review
- Sharp price drop may force Govt to rethink on windfall tax
- Windfall tax of ` 23,250/tn or $40/bbl on domestic crude production At that time, the finance - -It’s effective from July 1
New Delhi: A massive crash in refining margins of diesel, petrol and ATF coinciding with a cool-off in crude oil prices from their peaks in June has diminished the super-profits of refiners, a report said on Wednesday.
In a surprise move, the government on July 1 slapped export duties on petrol and ATF (Rs6 per litre or $12 per barrel) and diesel (Rs13 a lire or $26 a barrel) and imposed a windfall tax on domestic crude production (Rs23,250 per tonne or $40 per bbl). At that time, the finance ministry stated that the taxes will be reviewed every fortnight. "The last two weeks have seen a massive crash in the refining spreads (or margins) of diesel, gasoline (petrol) and aviation fuel (ATF) coinciding with a cool-off in crude prices from their respective peaks seen in June," brokerage CLSA said.
"This questions the need for the continuation of the windfall tax imposed about two weeks back," it said. Post windfall tax, the realised spread on diesel and gasoline has fallen to near loss-making levels, while the realisation on aviation fuel and crude has also gone below 15-year averages.
"A $12 per barrel windfall tax on this takes the realised refining spread down to a near loss-making level of just $2 per barrel. Similarly, the diesel spread after the export tax of $26 per barrel would be a meagre $2 a barrel," it said.
