ONGC asks the government to scrap the windfall tax

New Delhi, Sept 19: India's top oil and gas producer ONGC wants the government to scrap the windfall profit tax on domestically produced crude oil and instead use the dividend route to tap into bumper earnings resulting from a surge in global energy prices, reported PTI.

 

 

 

The company has also favored a floor price for natural gas at USD 10 per million British thermal unit- the current government-dictated rate- to help bring deposits in challenging areas to production.

 

 

 

State-owned Oil and Natural Gas Corporation (ONGC) management during discussions with government officials stated that levying a windfall profit tax on domestic oil producers, while at the same time reaping rich savings from buying discounted oil from Russia was unfair. Buying discounted Russian crude oil, which was shunned by the West since the Ukraine conflict, has helped save Rs 35,000 crore and these savings should be plowed back by boosting domestic output, reported PTI citing sources. ONGC management has told the government the savings from the Russian oil buy should be allowed to be passed on to the company which will invest the same in identified projects.

It feels companies should be allowed to reap higher revenues and profits from elevated oil and gas prices instead of levying a windfall profit tax on prices above a threshold. This higher profit can be then tapped for dividends which are a more equitable way of distributing wealth, the company management told the government. As per the extant guidelines, ONGC pays a minimum annual dividend of 30 percent of net profit or 5 percent of the net worth, whichever is higher. Following this policy, the firm will pay a higher dividend to the government, which holds almost 59 percent of shares in the firm, as well as other investors, boosting their confidence in the company. This would boost the company's share price and valuation, benefiting the government the most. This route will also allow the company to retain a fair amount of money for spending on finding oil and gas in unexplored areas and bringing even smaller resources to production which will ultimately help the nation cut down on its imports, sources said.

 

Also Read: India reduces Windfall Tax 

 

India first imposed windfall profit tax on July 1, joining a growing number of nations that tax super normal profits of energy companies. Export duties of Rs 6 per liter (USD 12 per barrel) were levied on petrol and aviation turbine fuel and Rs 13 a liter (USD 26 a barrel) on diesel. A Rs 23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied.