With crude oil prices easing on the back of fears of an impending global recession, the Centre cut recently imposed cesses and levies on diesel and aviation turbine fuel and removed the cess on exports of petrol effective Wednesday.
Additional excise duty equal to Rs 6 per litre on petrol exports has been removed entirely, while that on diesel exports has been cut to Rs 11 per litre from Rs 13 per litre earlier. Also, the cess by way of special additional excise duty (or windfall tax) on domestic crude being sold to domestic refineries at international parity prices has been cut to Rs 17,000 per tonne from Rs 23,250 per tonne, while the export duty on aviation turbine fuel has been lowered by Rs 2 to Rs 4 per litre.
The government also exempted petrol, diesel and ATF from levy of duties when exported from refinery units located in the Special Economic Zones.
The Ministry of Finance did not give a timeline for continuation of the levy, but had said it will assess the situation every 15 days to review the impact of these duty changes. Last week, Ministry officials had indicated that a review will consider lowering the tax and cesses following the slide in crude oil prices.
With an aim to address the issue of fuel shortage in the country, the government on July 1 imposed a special additional excise duty on export of petrol and diesel. Cesses equal to Rs 6 per litre on petrol and Rs 13 per litre on diesel were imposed on their exports.
The Centre also imposed a cess of Rs 23,250 per tonne (by way of special additional excise duty) or windfall tax on domestic crude being sold to domestic refineries at international parity prices.
Earlier, Revenue Secretary Tarun Bajaj had said that the increase in duty will be applicable to SEZs also, but the export restriction will not be applicable.
Prior to that, from early June, fuel pumps across the country have been reporting fuel shortages, leading to their closure. The situation of fuel shortage at pumps peaked during the middle of June, resulting in the government issuing a statement on the matter.
The statement assured of enough fuel availability in the country and asked oil marketing companies to ensure their fuel pumps remain open. Global crude prices had risen and domestic crude producers were seen as making “windfall gains”. Private oil marketing refiners were exporting petrol and diesel to foreign countries like Australia for better realisation.
The shortage of fuel at retail outlets was triggered by oil marketing companies turning averse to selling fuel at a loss since retail prices had not increased despite rising crude and the depreciating rupee — these two factors had led to oil marketing companies reporting under-recoveries of Rs 20-25 per litre on diesel and Rs 10-15 per litre on petrol.
Over the last fortnight, the benchmark contract of Brent on the Intercontinental Exchange had fallen by over 12 per cent on fears of a recession in the US and overall global recession prompting the government to undertake the review. Brokerage CLSA had said last week that a crash in refining margins of diesel, petrol and ATF, coinciding with a cool-off in crude oil prices from their peaks in June, had diminished the super-profits of refiners.