Govt has simply now introduced export tax on diesel / petrol as refineries like reliance had been making windfall beneficial properties
Reliance is down 6% on this news . This news prima facie may seem negative but is positive for the trajectory of local inflation as this move encourages more supply to the domestic facing industries.
Govts action from last month n half clearly suggests that it is willing to make exports tough to encourage supply in domestic mrkts
Today govt also announced import duty hike of 5% on gold imports …which shows govt is getting worried about rising fiscal deficit n rupee depreciation
Few days ago there were media reports that Reliance is pressurising Government to increase retail prices of petrol so that it too can follow suit. Instead of doing that, Government asked it to pay additional taxes.
Still the opposition will cry that the Government works only for Ambani/Adani.
I read in few articles that USA started this windfall gain on oil profits. I think India is following suit. Good decision as the local price of fuel might fall.
Curbing exports will not help the fall in local price. There is no supply issue in our country. Its just that the exports made more money than local sales.
Two major outcome from this
- Govt. reveals its sadist mindset to punish whoever is making money/profit. It earlier applied to the steel sector as well
- Curb in exports may depreciate the currency further, note that the import was done at a lower cost, value added and exported at higher cost. Now that opportunity cease to exist, OMCs and exporters may wish to stop doing this rather than do at a low margin.
GOI is short of money. The objective of this tax is not to curb export but to raise funds. Even USA/,UK are doing the same thing.
If refineries in India export fuel outside then it hurts domestic prices. Same about crude especially when India imports bulk of its crude. So the taxation.