Reliance, ONGC slip as Street turns cautious after windfall tax hike

Following the notification on Saturday, shares of Reliance, ONGC, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited declined more than a percent in early deals.

The downtrend comes as the latest increase in windfall tax or Special Additional Excise Duty (SAED) reverses the reduction in two previous rounds in September. This follows the rise in international oil prices. The basket had averaged $116.01 in June, which was used as a base to introduce the levy from July 1.

The government has also re-introduced the levy on overseas shipment of jet fuel (ATF) in line with the rise in international oil prices. The levy on jet fuel, which was brought down to nil at the beginning of this month, was re-introduced at Rs 3.50 a litre.

Following the increase in ATF levy, here' how stocks of airlines fared:

It must be noted that while the windfall profit tax is calculated by taking away any price that producers are getting above a threshold, the levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily the difference between international oil price realised and the cost.