InvestorQ : How do you see the reduction of windfall tax impacting ONGC, OIL and RIL?
Aashna Tripathi made post

How do you see the reduction of windfall tax impacting ONGC, OIL and RIL?

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Aditi Sharma answered.
4 weeks ago
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With price of crude coming down to $100/bbl, the decision to withdraw the windfall tax was as quick as the decision to impose it. The idea of windfall tax was to ensure that oil companies did not make supernormal profits amidst sky-high prices. Government has reduced windfall tax on diesel and ATF exports by Rs2/litre while windfall tax of Rs6/litre on petrol isscrapped. Tax imposed on domestically produced crude has been cut by 27% to just about Rs17,000 per tonne. SEZ refineries are also now exempted from export taxes.

Brokers like Morgan Stanley are positive on this decision to rapidly cut windfall tax. The reduction in windfall tax rates could see ONGC profits at $25/bbl, i.e. 20% higher than last year. In the case of Reliance Industries, its gross refining margins (GRMs) are likely to be 20% higher on a yoy basis. However, the good news is that once the INR stabilizes versus dollar, the benefits of reduced windfall tax will get magnified. That was evident in the stock prices of these companies as they reflected the churned up valuations

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