Branded petrol, diesel may cost more

Branded petrol and diesel like Speed, Turbo Jet, Xtra Mile, Power and others may soon cost more following a draft circular issued today by the Central Board of Excise and Customs (CBEC).

The circular has said mixing additives in normal motor spirit (petrol and diesel) results in the creation of a new product. Accordingly, the CBEC proposes to treat such branded fuel as "manufactured products".

This implies that the oil marketing companies will have to pay excise duty on the value added over and above what they pay on normal petrol.

These branded fuels are not priced on a fixed price formula like regular petrol and diesel. "The pricing is within a band that can vary by Rs 2 for petrol and by about 60 paise for diesel, depending on the market," said a senior official of an oil marketing company.

The additional duty is likely tobe passed on to consumers, especially as oil marketing companies are already reeling under high under-recoveries on sales to the tune of Rs 240 crore every day.

Branded petrol accounts for 30 per cent of overall petrol sales. Branded diesel accounts for 15 per cent of overall diesel sales.

Proposing the new rules, the CBEC has said that once a final decision in taken on the move, the 1994 rules would stand withdrawn. CBEC has invited responses from public on the draft circular till November 30.

"The impact will not be much on refineries if they blend petrol inside their factory since they are paying duty on the final price. But, it may have an impact on companies like Shell which may be blending petrol and diesel by buying it from others and then selling it as a branded product," said Pratik Jain, director, KPMG.

"Whether there will be an impact on actual retail price remains to be seen," Jain added. He expects the CBEC move to be challenged in court by oil marketing companies.