Govt mulls windfall tax on ONGC to pay OMCs to ease fuel price impact: report
25 May 2018
1
The government is considering a windfall tax on oil producers like Oil and Natural Gas Corp (ONGC) and plough the money into downstream refiners and fuel retailers as part of its efforts to moderate the impact of spiralling retail prices of petrol and diesel.
The government has set $70 as the upper limit for triggering the windfall tax and the tax, which may come in form of a cess, and will take effect the moment ONGC starts selling oil at prices above $70 per barrel, reports quoting sources privy to the development said.
The levy will, however, be confined to crude produced from domestic fields. Oil producers who get paid international rates for the oil they produce from domestic fields, would have to part with any revenue they earn from prices crossing $70 per barrel.
The revenues so raised would be paid to fuel retailers, allowing them to absorb spikes beyond the threshold levels, they said.
The centre may also give some relief in excise duty rates to give immediate relief to consumers. States too would be asked to cut sales tax or VAT to show a visible impact on retail prices.
The government will be levying cess on all oil producers — both state-run and private sector — so as not to attract criticism of stifling state-owned explorers. A similar tax was considered in 2008 when oil prices were on the rise but the idea was dropped after stiff opposition from private sector firms like Cairn India.
Windfall tax is levied in some of the developed countries globally. The UK in 2011 raised the tax rate to be applied to North Sea oil and gas profits when the price is above $75 per barrel.
China on 1 April 2006, began levying the special upstream profit tax on domestic oil producers to redistribute and allocate the windfall income enjoyed by the oil companies and subsidise disadvantaged industry and social groups that are most affected by soaring crude oil prices. It in 2012 raised the windfall tax threshold to $55 per barrel.
The revenues so raised would be paid to fuel retailers, allowing them to absorb spikes beyond the threshold levels, they said.
The centre may also give some relief in excise duty rates to give immediate relief to consumers. States too would be asked to cut sales tax or VAT to show a visible impact on retail prices.
The government will be levying cess on all oil producers — both state-run and private sector - so as not to attract criticism of stifling state-owned explorers.
Windfall tax, is levied in some of the developed countries globally. The UK in 2011 raised the tax rate to be applied to North Sea oil and gas profits when the price is above $75 per barrel.
