homemarket Newscommodities NewsIndia's windfall tax on crude oil will not erode ONGC's realisations: Analyst
India's windfall tax on crude oil will not erode ONGC's realisations: Analyst
The increase in windfall taxes on crude oil production reflects the government's strategy to maximise its revenue intake during times of favorable market conditions. By capitalizing on the surge in crude prices, the government aims to generate additional funds that can be allocated to various developmental projects and welfare schemes.
In a move aimed at capitalising on the recent surge in crude oil prices, the government has decided to implement an increase in windfall tax on crude oil production. The tax hike, amounting to Rs 1,600 per tonne, comes into effect after a gap of two months. According to Probal Sen, an Energy Analyst at ICICI Securities, this decision has been made in-line with the rising crude prices, as the government aims to benefit from the substantial revenues generated by the oil industry.
“The government has been very proactive in terms of changing the windfall tax in-line with the way that crude prices are moving,” he said.
As a result, the realisations for oil and gas giants like ONGC (Oil and Natural Gas Corporation) and Oil India Limited (OIL) continue to remain on the higher side.
Sen further explained that the government is factoring in realisations within the range of $73-75 per barrel.
“The net realisations for the OMCs has remained thereabouts between $75 and $76 per barrel. While it takes away some of the profits that maybe ONGC and OIL have been making over the last couple of months, the fact is that their net realisation is still at about the target level that the government had earlier spoken about,” he mentioned.
He doesn’t think the street is building in anything more than $73-75 per barrel in any case. “Even with this tax, the realisations remain at that level,” he added.
This indicates that the authorities are considering the prevailing crude prices while making decisions regarding taxation. By implementing windfall taxes, the government aims to tap into the additional revenue generated by the oil industry during times of elevated prices.
However, Sen also expressed his opinion on the future prospects of crude oil prices. While he believes that Brent crude prices should witness an upside from their current levels, he does not foresee a massive rally. This indicates that while prices may continue to rise, they are not expected to experience a sudden and substantial surge in the near term.
For more details, watch the accompanying video
(Edited by : C H Unnikrishnan)
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