What is the exceptional tax on oil companies?


Russia’s attack on Ukraine has upended the supply chain, pushing global inflation to uncomfortable levels. And one of the reasons for soaring inflation is the sharp rise in crude oil prices.

But as public finances bleed, oil and gas companies around the world are hitting money, whether upstream, midstream or downstream.



And these gains do not come from an improvement in their processes but from the geopolitical situation.

Crude prices are now hovering around $120 a barrel. On Wednesday, it was $118 a barrel.

As governments and central banks take steps to curb inflation, the rhetoric about taxing companies that profit from rising crude prices is gaining momentum.

Such proposals were discussed and even imposed earlier in many countries. Last week, the UK announced a 25% tax on energy companies to ease the financial burden on households. Some other countries like Italy and Hungary have also imposed this tax.

A senior government official told Business Standard on condition of anonymity that while theoretically an exceptional tax on oil companies can be imposed in India, there has been no discussion of it under the current exemption.

On Monday, in response to speculation over the windfall tax, state-owned companies Oil India and Oil and Natural Gas Corporation (ONGC) said they had heard nothing from the government.

And if a windfall tax is imposed in India, it will not only be levied on private players like Reliance, but also on public behemoths. This means that the latter may have to compromise on dividends and share buybacks, from which the center benefits.

The center would require additional resource mobilization as it faces an increasing expense burden and declining revenue in FY23. The FY23 fertilizer subsidy budget estimate is of 1.05 trillion rupees.

Dear reader,

Business Standard has always endeavored to provide up-to-date information and commentary on developments that matter to you and that have wider political and economic implications for the country and the world. Your constant encouragement and feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these challenging times stemming from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative opinions and incisive commentary on relevant topical issues.
However, we have a request.

As we battle the economic impact of the pandemic, we need your support even more so that we can continue to bring you more great content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism we are committed to.

Support quality journalism and subscribe to Business Standard.

digital editor

About Leni Loberns

Check Also

Exxon Mobil makes first oil discovery in Angola in 20 years

Over the past five years, the largest independent oil and gas company in the United …