Small oil and gas field operators ask govt for exemption from windfall tax

Small oil and gas field operators have urged the central government to withdraw the windfall tax on crude produced in FY23 as it would be the first year of production for almost all of them, reported Livemint on Tuesday.

The Association for Discovered Small Field Operators (ADSFO), in a letter to the oil ministry, said they should be exempt from petroleum cess (levied by way of special additional excise duty or SAED), or the windfall tax on their entire production for FY23, the report stated.

The central government from July 1, 2022, levied a tax on crude and petroleum products to capture supernormal profits of energy companies amid a sharp rise in global oil prices. However, the cess is not applicable to crude oil produced from discovered small fields (DSF).

The Centre had notified in subsequent notifications that the windfall tax would not be levied on firms whose oil production was less than 2 million barrels in FY22 and that the cess was not applicable on incremental production over the production reported in the last financial year.

While the intention is not to overtax small and marginal field operators, the association said, it added that conditions in notifications make it difficult or DSF operators to get an exemption.

As most of the DSF operators are yet to produce oil and gas from their fields and the first production may start in FY23, the association said that the finance ministry should issue a clarification that all production should be exempt from cess this year, the association said, reported Livemint.

The ADSFO in the letter said that there is no way that DSF operators could claim exemption from tax on incremental production during the previous year as there was no production during that period. The association further urged that all production in FY23 should be taken as incremental as this granted complete exemption from windfall tax, Livemint reported.