Windfall tax on crude, diesel & jet fuel slashed The government on Friday cut the windfall tax on domestically produced crude oil sharply from Rs 4,900 to Rs 1,700 per tonne, the lowest level since the tax was imposed on July 1, thanks to continued decline in global crude prices. In the latest fortnightly review of the one-off taxes, the government has also cut the tax levied on the export of diesel to Rs 5 per litre from Rs 8 and that on jet fuel to Rs 1.5 a litre from Rs 5. The Indian basket of crude oil prices, which averaged $77.8/bbl in December so far, was 11% lower than the average of $87.55 in November. The taxes were introduced on July 1, as the government felt that the elevated crude prices were allowing oil companies to make windfall profits and that the exchequer must get a share of such gains. On July 1, the Centre imposed special additional excise duty of Rs 23,250/ tonne on crude and export taxes on petrol, diesel and ATF at Rs 6/ litre, Rs 13/ litre and Rs 6/ litre, respectively. The tax on petrol was removed subsequently. No windfall tax is applicable on exports from special economic zones. The taxes move either way fortnightly since then, depending on crude prices and the refining spread. Also Read: Windfall tax up on domestic crude, down on export of diesel “India’s fortnightly windfall tax revision on oil producers was on expected lines,” Morgan Stanley said on the latest duty change. Windfall tax on domestic oil production declined from about $8.3 per barrel to $2.8. “The adjustment, while still ad hoc, highlighted the cap on the producer oil price at around $75 per barrel and on profitability at $ 20-26 per barrel,” it said. The export tax on diesel has been reduced from $15.7 per barrel to $ 9.6 and jet fuel saw a decline from $9.6 a barrel to $2.9. While private refiners Reliance Industries and Rosneft-backed Nayara Energy are the principal exporters of diesel and ATF, the windfall levy on domestic crude targets producers like state-owned ONGC and Vedanta-controlled Cairn. “RIL’s gross refining margin under the new tax regime is now $15.1 per barrel (as 30% of refinery output is subject to this tax), and increased with lower crude loss, crude discount, petcoke gasifier benefit and decline in export taxes,” Morgan Stanley said. The implied diesel and jet fuel cracks, adjusted for the windfall tax, average $15 per barrel and $26 a barrel, respectively. “We remain bullish (on) the refining cycle and see upside risks to regional margins despite investor concerns around China exports as global inventories continue to unwind,” it said.
Retail inflation in milk was reported at 8.85% in May 2023. The milk inflation has remained elevated at over 6% since August 2022. Despite India being the largest milk producer since 1998, the commodity has been the second biggest factor after cereals such as rice and wheat in driving up retail inflation in the last fiscal.
Milk has the second highest weight in the food and beverages basket of the consumer price index at 6.61%, a notch lower than cereals and products with a 9.67% weight. Organised players, including Mother Dairy and Amul, hiked prices multiple times in the last one year citing higher fodder cost, robust demand and some impact due to reports of lumpy skin disease.
Industry sources said feed cost, which has a share of more than 65% in the cost of production of milk, has increased to Rs 20/kg from Rs 8 a year ago. The finance ministry in April had attributed the elevated milk inflation to a demand supply mismatch and said it could be one of the factors apart from volatile international crude oil prices and constrained supplies of milk would influence the country’s inflation trajectory.
“Milk production has been impacted by a lumpy skin disease infecting millions of cattle in late 2022,” the ministry said in the monthly economic review, adding that the vaccination drive against the disease is expected to curb the spread and immune the cattle against the skin disease.
According to official data, currently India is the world’s largest milk producer, and has a share of 23% in global milk production. For the first time in decades, the country’s milk production is likely to have stagnated in 2022-23 due to Lumpy Skin Disease in cattle across several states and the lagged effect of Covid-19 in the form of stunting of the animals, a senior official with department of animal husbandry and dairying recently had stated. The milk production was estimated at 221 million tonne in 2021-22.