RIL Falls, ONGC Gains After Third Windfall Gains Tax Review

In its fortnightly review of windfall gains tax, the centre on Thursday (August 18) slashed the cess on domestically produced crude from Rs. 17,750 per tonne to Rs. 13,000 per tonne. The move shall be positive for upstream companies and the brokerage firm ICICI Direct is of the view that "the cess has been reduced to around US$22/bbl from August 19 in the third review of windfall taxes. This will reduce cess on domestic oil production companies (ONGC in our coverage universe).

Likewise on the move, shares of ONGC gained by over 2% to day's high price of Rs. 138.5 per share on the NSE.

Furthermore, as per the circular, excise duty on jet fuel exports has been hiked to Rs. 2/litre from zero whereas excise duty on export of diesel has been hiked to Rs.7/litre from Rs. 5/litre earlier. The excise duty on export of petrol continues to be nil. The changes come into force from today i.e. August 19, 2022.

Brokerage firm ICICI Direct on the development says that, "additional excise duty on fuel exports will be effective from August 19. This will reduce refining gains of exports focused companies, mainly Reliance Industries. So, as viewed shares of RIL in trade on August 19, 2022 were trading a little soft and at day's low hit a price of Rs. 2644, down 0.65% over the previous close.

The windfall gains tax is reviewed on a fortnightly basis taking into account the global crude prices. The centre imposed windfall gains tax in July that taxes windfall gains that accrue to oil companies on account of high energy prices.