reliance windfall tax: Windfall tax impact on Reliance to be milder than others: Experts


The impact of the recent fuel export tax on will be milder than others, experts said.

“With fuel export tax for refiners being reviewed every fortnight, we see limited impact on

‘s earnings, with above mid-cycle margins achievable despite the tax. However, stock implies cap at single-digit margins,” said Morgan Stanley in a research report.

The Centre announced the levy of additional excise duty/cess of Rs 6/litre on petrol and Rs 13/litre on diesel exports. On Aviation Turbine Fuel (ATF), the government announced additional excise duty of Rs 6 per litre.

An additional excise duty/cess of Rs 23,250/tonne has also been levied on domestic crude oil to cap the profit the producers are making by selling to domestic refineries at international parity prices.

The government also said that the regime will be reviewed every fortnight. Revenue secretary Tarun Bajaj, today, said that the windfall tax will be withdrawan only if the global oil prices fall by $40 a barrel.

“With the government looking to review the tax every fortnight, RIL can sustain refinery margins at $15/bbl or above despite the tax as refining markets remain very tight.”

Even a $15/bbl gross refinery margin (GRM) would imply earnings upgrades and not downgrades to Street estimates, says Morgan Stanley.

In its research report, Credit Suisse said the blended impact on RIL from cess on export of petroleum products is about $7-8/bbl, translating to an annualised impact of $3.5-4.0bn on EBITDA.

“The key thing to note here is that this impact is not on base profits but is on the excess profits, as current refining margins are very high. In our interaction with investors, the key questions were around the duration of applicability of this cess and the time lag impact on RIL, if refining cracks were to correct but the cess continues for a quarter or two,” Credit Suisse said.

According to Credit Suisse, RIL was generating mid-cycle GRM of $8-9/bbl. Hence, it needs refining margins to sustain at at-least $17-18/bbl for minimal impact on the base business profitability (current GRM is high at $30/bbl+, thus, the buffer is still high).

The recent cess on export of petroleum products will more than compensate the Central government that cut the excise duty on petrol by Rs 8/litre and on diesel by Rs 6/litre in May 2022, Credit Suisee said.

The excise duty cut had impacted the government’s tax revenue by Rs 1 trillion on an annualised basis.

“As per today’s notification, it imposed duty on domestically produced crude (by $40/bbl.) and on export of petrol, diesel and ATF (cess of Rs 13/litre on diesel and Rs 6/itre each on petrol and ATF). This can possibly fetch about Rs 1.4 trillion on annualized basis for the government,” Credit Suisse said.

(With inputs from IANS)


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