Shares of upstream oil companies such as Oil India and ONGC soared in early trade on May 16 after the government reduced the windfall tax on crude oil exports to zero from Rs 4,100 per tonne.

At 10 am, Oil India was up 2% at Rs 264.70 on the BSE, while Oil and Natural Gas Corporation (ONGC) was up 1.3% at Rs 167.90.

The windfall tax on crude oil has been cut to zero from Rs 4,100 per tonne, according to a government circular issued late on May 15. The waiver will take effect from today.

The windfall tax, also known as the Special Additional Excise Duty (SAED), is already zero-taxed on Aviation Turbine Fuel (ATF), petrol and diesel. This has remained the same.

The finance ministry also decided to waive the crude oil tax during a fortnightly review. During the last review meeting on May 1, the government cut the windfall tax on crude oil to Rs 4,100 per tonne from Rs 6,400.

The government introduced the windfall tax on July 1, 2022, to charge the industry the huge profits earned by selling refined crude oil in the international market. Its volume is reviewed every two weeks based on fluctuations in international crude oil prices.

Producers including state-owned Oil and Natural Gas Corporation (ONGC) and Vedanta-controlled Cairn have been hit by the windfall tax on domestic crude.

Global crude oil prices rose for a second day on May 16, as plans by the United States to buy oil for its Strategic Petroleum Reserve (SPR) and raging wildfires in Canada heightened supply concerns.

Benchmark Brent crude futures inched up 0.4% to $75.53 per barrel.

Earlier, ONGC had urged the government to scrap the profit tax on domestically produced crude oil and instead use the dividend route to capitalise on the lucrative gains from soaring global energy prices.

Shares of ONGC are up more than 11% so far this year, while Oil India has gained 23%.