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Export Duty On Petroleum Products Hiked As Government Steps In

The government imposed special additional duties on export of petrol and diesel effective July 1.

<div class="paragraphs"><p>(Photo: BQ Prime)</p></div>
(Photo: BQ Prime)

The government has stepped in to curb export of petroleum products as the country's public sector oil marketing companies turned importer of the petrol and diesel.

The government imposed special additional duties on export of petrol and diesel effective July 1, according to a notification. A special additional excise duty of Rs 6 a litre has been imposed on export of petrol, and Rs 13 a litre on diesel.

The government imposed special additional excise duty on domestic production of petroleum Crude of Rs 23,250 a tonne and aviation turbine fuel of Rs 6 a litre.

It has provided some relief in form of exemption to entities whose output in the last fiscal year (FY22) stood below 2 million barrels and also on excess production over FY22's level.

In a clarification issued by Director General of Foreign Trade, the excise duty imposed on petrol and diesel will not be applicable on produce coming from 100% export-oriented units or special economic zones.

The government also exempted import of crude from cess.

The government also asked the fuel exporters to meet domestic commitment that requires 50% of the petrol quantity mentioned in the shipping bill has to been supplied or will be supplied to the local market in fiscal year 2023. For diesel, the local sale commitment is 30%.

To put this in perspective, private oil producers will have to pay an additional $40.64 a barrel in duties. Meaning, if an upstream oil producer was breaking even at say $60 a barrel, now that will happen at $100 a barrel. If crude falls below $100, the upstream producer will start making losses. This will be negative for Oil and Natural Gas Corp., Oil India Ltd. and Vedanta Ltd.

For refineries, exports of petrol, diesel and ATF will be less lucrative. In addition they will have to meet the domestic commitments. Fuel prices in the domestic market have been stagnant since the steep cut in excise duty by the government. There is likely to be some impact on the operating income of private refiners including Reliance Industries Ltd. and Nayara Energy Ltd.