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Time to revisit windfall tax on oil

The decline in global prices may force a rethink of this tax if not now but in the subsequent reviews, said CLSA…reports Asian Lite News

The fall in the crude oil prices as well as the refining margin for diesel, petrol and aviation turbine fuel, raises the question whether the Indian government should continue with its windfall tax, said CLSA Ltd in a report.

The last two weeks have seen a massive crash in the refining spreads of diesel, gasoline and aviation fuel coinciding with a cool-off in crude prices from their respective peaks seen in June, the report said.

Given this situation, CLSA wondered whether there is a need for the continuation of the windfall tax imposed about two weeks back.

Post windfall tax, the realised spread on diesel and gasoline has fallen to near loss-making levels while the realisation on aviation fuel and crude have also gone below 15-year averages, CLSA said.

The CLSA expects the government to relook at the windfall tax in its fortnightly reviews.

Any relaxation would be a big trigger for ONGC and Oil India and a relief for Reliance Industries, the report added.

Early this month, the Indian government announced the levy of additional excise duty/cess of Rs 6/litre on petrol and Rs 13/litre on diesel exports.

The government also announced the levy of additional excise duty/cess of Rs 23,250/tonne on crude oil as special additional excise duty, since domestic crude producers sell to domestic refineries at international parity prices, and as a result, are making windfall gains.

Similarly in the case of aviation turbine fuel (ATF) exports, a special additional excise duty of Rs 6/litre was announced.

While crude prices have increased sharply in recent months, the prices of diesel and petrol have shown a sharper increase, the government had said.

The government also said the tax will be reviewed every 15 days.

The decline in global prices may force a rethink of this tax if not now but in the subsequent reviews, CLSA said.

“If this tax remains for long, we fear it may hamper the positioning of this government as an export and manufacturing friendly regime,” the report noted.

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‘Windfall tax on Covid profits could solve food crisis’

A windfall tax could be used to alleviate the cost of living crisis for the poor in developed countries, and the building hunger in the developing world, said Bucher….reports Asian Lite News

Food, fossil fuel and pharmaceutical companies that have enjoyed bumper profits in the Covid-19 pandemic and its aftermath should be hit with a windfall tax on their excess income, the global head of Oxfam has said.

A windfall tax of 90 per cent on the excess profits globally would yield about $490 billion that could be used to solve the food crisis, which is heading to “catastrophic levels” for hundreds of millions of people, and set the world on the path to a sustainable food system, the Guardian quoted Gabriela Bucher, executive director of Oxfam International, as saying.

“The food crisis we’re facing is extremely serious, and probably unprecedented. There’s insufficient funding to address the immediate life-saving that is required, but also for the long term, addressing the root causes,” she said.

“If we don’t act fast, it will continue and reach really catastrophic levels.”

A windfall tax could be used to alleviate the cost of living crisis for the poor in developed countries, and the building hunger in the developing world, argued Bucher.

“We know that large corporations are making very significant profits, and have been making them during the pandemic,” she said, singling out fossil fuels, food and pharmaceuticals.

“We’ve calculated how much excess profit there has been during the pandemic and taxing excess profits as a windfall tax would generate resources both for the most affected populations in the richer countries, and to be able to fulfil commitments in terms of aid, and responding to the worst suffering in the world.”

Such a tax would also produce funds to bolster the food system against future crises, the Guardian quoted the Oxfam executive director as saying.

“(It would) also address longer-term food security issues, because it’s important to save lives now, but also really strengthen the systems that will enable populations to be resilient,” she said.

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