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Fitch Ratings in its APAC Oil & Gas Outlook 2023 has said that the five-month-old tax on windfall profits made by oil companies will be phased out in 2023 on the back of moderating oil rates. On July 1, 2022, the government had levied a new tax on domestically-produced crude oil as well as on the export of petrol, diesel and jet fuel (ATF) to take away windfall gains accruing to oil companies from a global surge in energy prices following Russian invasion of Ukraine. The tax rates are revised every fortnight based on prevailing international rates. The levy on petrol export has since been abolished.

The rating agency said domestically-produced crude oil, which makes up for 15 per cent of all oil consumed in the country, is priced at international rates. It projected $85 per barrel price for Brent crude oil, down from $100 in 2022. It expected India's petroleum product demand recovery to be supported by a GDP growth estimate of 6.7 per cent. It also expects oil marketing companies (OMCs) marketing margins to recover and partly recoup 2022's losses, given our modestly lower crude-price assumptions.

However, it said refining margins may ease to mid-cycle levels from all-time highs though still remaining healthy, which should support improvement in OMCs' credit metrics. It also said upstream companies will see robust cash flow despite some moderation from very high levels in 2022 and higher domestic gas prices. It added that downstream oil refining and fuel retailing companies will continue to have high capex during FY24 as they invest in expanding refining capacity and retail networks.