RIL, ONGC shares to get recover after windfall tax on key petroleum products is scrapped

The shares of oil conglomerate Reliance Industries (RIL) and state-owned ONGC recovered about 2% from their day's low on Monday after the finance ministry announced the scrapping of the windfall tax on aviation turbine fuel (ATF), crude oil, diesel, and petrol products.

This decision, effective immediately, marks the end of a levy that was introduced in July 2022 and aims to provide relief to oil producers and refiners.

The windfall tax was initially implemented to capture the significant profits that oil producers gained from rising global crude prices. The recent change is expected to benefit major oil players like Reliance Industries and ONGC by enhancing their gross refining margins, which measure profitability in refining crude oil.

Furthermore, the government has also removed the Road and Infrastructure Cess (RIC) on petrol and diesel exports, further easing financial pressure on the oil sector.

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The tax had become less effective in recent months as global crude oil prices declined, reducing the revenue generated. Industry dissatisfaction also played a role, with stakeholders contending that the levy discouraged higher production levels.

The removal of the tax is expected to improve the financial performance of oil companies and potentially encourage higher production. It aligns with the government’s broader strategy to foster growth in the energy sector and boost exports.

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