Govt plans to impose windfall tax on ONGC to soften fuel prices

Govt considers windfall tax on oil producers; ONGC drops 5%

The levy will, however, be confined to crude produced from domestic fields. "The political difference between two oil producing countries Iran and Venezuela has been a major cause behind the rise in the price of fuel in the worldwide market".

The tax could be used in two ways - as a subsidy to fuel retailers for absorbing the hikes and not passing them on to consumers or compensation to the government if it cuts the excise duty.

He added that while oil minister Dharmendra Pradhan will meet oil marketing companies on Wednesday, they have been insisting that all petro products be brought under the Goods and Services Tax. The oil price issue indicates several economic implications for India, going forward. Petroleum minister will have a meeting with the officials of the oil companies. Critics argue that as oil minister, he should at least have a bigger say - and an even bigger intent on providing relief. Since Indian oil producers sell their crude at global prices, any revenues from oil sales at more than US$70 would be collected by the state and transferred to fuel retailers to cushion the price blow to end consumers.

Petrol prices across the four metros increased by over Rs 3 per litre in 12 days after dynamic pricing system was resumed on May 14, data on the Indian Oil Corp (IOC) website shows. It is learnt that Indians living on the borders of the above two countries draw their requirement of petrol and diesel from across the borders at nearly half the rates.

Sources said a $70 per barrel threshold for the windfall tax is sufficient to cover for capital expenditure requirement of ONGC and other oil producers.




The dealers are asked to cut a part from their commissions and they will be reimbursed by the oil marketing firms.

However, Pradhan doesn't see this as a potential solution as the central government had reduced the excise duty on fuel by Rs. 2 per litre only recently in the wake of poor.

It has also worked out the math of the amount of taxes that are shared with states as part of the devolution formula and what goes to the exchequer.

With consumers feeling the heat of surging fuel prices, there have been demands and suggestions from various quarters, including from within the government, for immediate action to curb the prices. In addition to this, the Value-Added Tax on the two auto fuels varies from State to State.

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