Kolkata: The government has imposed windfall gains tax of Rs 3 per litre on the export of petrol. On the other hand, it reduced the levy on diesel to Rs 16.5 per litre and jet fuel or ATF (aviation turbine fuel) to Rs 16 per litre. The new charges will be effective from Saturday, May 16. As the nomenclature indicates, windfall tax is defined as a temporary tax levied by governments on industries which witness unexpected surges in profitability. These are typically caused by geopolitical crises and/or supply chain bottlenecks. The idea is to earn from the taxes of super-profits or windfall gains during times of higher global prices. This is a tool for governments to regulate the trade deficit. The decision was announced less than 24 hours after the decision to raise retail prices of petrol and diesel.
Special additional excise duty
The windfall tax has come as a Special Additional Excise Duty. It is adjusted every fortnight by the government based on fluctuations in international crude oil prices. The special additional excise duty on petrol at Rs 3 per litre comes for the first time since the hostilities began on February 28 in West Asia when US forces attacked Teheran. The objective of the windfall tax is to rein in exporters from taking undue advantage of the price differences, as globally crude oil prices have surged from about $70 a barrel to more than $110 a barrel.
Export duty on diesel and jet fuel
The duty on export of diesel was Rs 23 per litre, which has now been reduced to Rs 16.5 per litre. The duty on export of jet fuel was Rs 33 per litre but has been reduced to Rs 16 per litre. As the war progressed and prices of crude oil jumped in the global markets, the Centre imposed an export duty on diesel at Rs 21.50 a litre, and on ATF at Rs 29.5 a litre on March 26. When it was reviewed on April 11, the export duty on diesel was raised to Rs 55.5 per litre and that on jet fuel to Rs 42 per litre. The duties were slashed to Rs 23 per litre on diesel and Rs 33 per litre on jet fuel when the government reviewed the rates on April 30.
Retail prices raised, more can follow
The impact of the US-Iran war was finally felt on the retail prices of petrol and diesel when the oil marketing companies were allowed to raise prices of these two fuels by more than Rs 3 per litre. The price rise happened after a gap of four years. The latest measure in the petro-fuels domain is the imposition of the windfall tax. In April, the government cut excise duty on petrol and diesel by Rs 10 a litre to provide relief to the oil marketing companies which were getting sandwiched between galloping crude oil prices and an unaltered retail fuel price line. Some analysts believe that the raise is perhaps not adequate to cover the under-recoveries of the oil marketinc companies and more rounds of price rise can follow if the Strait of Hormuz remains closed for long.