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Export levy up on transport fuel to increase domestic supply


NEW DELHI: In a bid to tax the windfall gains by domestic refiners who import cheap crude oil from Russia and export the refined product at much higher prices, the Centre on Friday imposed special additional excise duty on export of petrol, diesel and aviation turbine fuel (ATF) with effect from July 1.

The cess for petrol and ATF is Rs 6 per litre, while it is Rs 13 for diesel. In addition, a cess of Rs 23,250 per tonne has been imposed on crude produced domestically. “Domestic crude producers sell crude to domestic refineries at international parity prices.

As a result, the domestic crude producers are making windfall gains,” a finance ministry release said explaining the rationale behind the move. However, there will be no cess for import of crude, the ministry clarified. “Further, small producers, whose annual production of crude in the preceding financial year is less than 2 million barrels will be exempt from this cess,” it said, adding that the new cess will have no adverse impact on domestic fuel prices.

The decision will directly impact domestic refiners Jio-BP, Nayara Energy and ONGC which, in turn, could tighten their global oil product supplies. Analysts believe the move to make export of fuel expensive is to ensure sufficient availability of petroleum products for domestic consumption but it may not achieve the desired result.

“With product prices expected to remain elevated in the international market, we believe unless domestic retail prices are revised upwards, there still exists substantial incentive for the private players to export a larger share of their product, albeit at reduced margins,” Crisil said.