Oil ministry has sought a review of the two and a half month old windfall profit tax on domestically produced crude oil

India’s oil ministry has sought exemption for some oil fields from windfall profit tax levied by the central government on domestically produced crude and has asked for a review of the new levy, which it believes is against the principle of fiscal stability provided in contracts for finding and producing oil.

The oil ministry said in the letter that according to its calculations, the new levy in the case of PSC and RSC results in a situation where the operator ends up paying much more than the windfall gain itself.

Starting July 1, India imposed the windfall profit tax, joining a growing number of nations that tax super normal profits of energy companies. While duties were slapped on the export of petrol, diesel and jet fuel (ATF), a Special Additional Excise Duty (SAED) was levied on locally produced crude oil. The Special Additional Excise Duty on domestic crude oil initially was Rs 23,250 per tonne and in the fifth revision it was brought down to Rs 10,500 per tonne.

The reduction in the windfall cess from the initial levels is expected to reduce the realisation for the government. Private refiners Reliance Industries Ltd and Rosneft-based Nayara Energy are the primary exporters of fuels like diesel and ATF.

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