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India has initiated a windfall tax on the country's oil producers and oil refiners who are exporting more due to the high international price of crude oil and refined products, Reuters said on Friday.
India's windfall tax will be 23,250 rupees per ton on oil producers and 6 rupees per liter on gasoline and jet fuel. The windfall tax on gasoil exports will be 13 rupees per liter.
What's more, fuel exporters will be required to sell at least some of their product domestically. The new taxes will serve as an incentive to keep more product at home and export less—a reality that will further tighten international markets for oil and oil products.
"As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market," a government-issued statement read.
Shares in India's Reliance Industries fell on the news as the market assesses the damage a windfall tax could inflict on the company's bottom line.
India has been purchasing growing amounts of cheap Russian crude oil, somewhat insulating the heavy oil importer from what would have otherwise been crippling prices. India's Russian crude oil purchases have shot up 50% since April and are five times higher than the volume that India imported from Russia during the entire year last year. Russian crude now makes up 10% of the country's total crude oil imports. About 40% of the crude oil that the country imports makes its way to private refiners.
India's state-run refiners are struggling to compete with India's private refining sector, delivering most of its finished products to the local market at government-capped prices. Shares in state-run oil companies rose on the news.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.