ONGC shares rise over 2% as Centre scraps windfall tax on crude production

Shares of Oil and Natural Gas Corporation Ltd (ONGC) gained more than 2 percent in early morning trade on April 5 after the government cut all windfall tax on crude oil on Tuesday.

As of today, only diesel carries a windfall tax while crude oil, aviation turbine fuel and petrol are exempted from any such levies.

The windfall tax on crude oil production was cut to nil from Rs 3,500 per tonne, according to a government notification from April 4. For diesel, the levy was cut to Rs 0.50 per litre from Rs 1 previously.

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At 9.33am, the ONGC stock was trading at Rs 156.10 apiece, up 1.6 percent from the previous close on the BSE.

India had imposed windfall tax for the first time in July 2022 on domestic crude oil producers to restrict unusually high profits of these companies.

When global oil prices had risen to above $100 per barrel, domestic refiners wanted to make gains from robust refining margins in overseas markets, instead of selling it within the country.

The government levies tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel, according to a report by the Economics Times.

Shares of ONGC had risen on Monday as well after crude prices climbed more than 5 percent. Additionally, with the windfall tax now scrapped on all crude exports, except diesel, shares of the company are likely to trade higher in the short term.

Every $1-a-barrel rise in crude realisation implies a 2-4 percent increase in earnings per share for companies such as ONGC and Oil India, according to analysts’ calculations.

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