Excise row may up LPG, kerosene price

If high crude prices do not push the petroleum ministry into increasing kerosene and domestic cooking gas prices, the dispute over excise duty payment on these two products may do so.

Oil companies like Oil and Natural Gas Corporation and Reliance have been issued notices by the finance ministry for paying excise on the refinery gate prices instead of on the selling price.

The dispute has been going on for about a year now and the amount due is threatening to touch Rs 1,000 crore. The disputed excise amount is for the four-year period from 2000 till 2004. After that, both PDS kerosene and domestic cooking gas were exempted from excise.

Senior officials from the petroleum ministry said if the oil companies were wrongly over-charged, the ministry would have no option but to recover the extra outgo from the consumers. In 2000, the finance ministry issued a notification that the duty would be applicable on assessable value.

However, oil companies argued that the finance ministry had also issued a clarification for making an exception in case of PDS kerosene and domestic cooking gas.

Upstream companies like ONGC have said the payment will be a passthrough for them. However, it will be a double whammy for oil marketing companies, which are already suffering from under recoveries.

In fact, ONGC has asked Indian Oil Corporation, to which it sells most of its products, to pay the dues. Sources said while for ONGC, the amount due (including interest and penalty) is about Rs 195 crore, for Reliance it is nearly Rs 500 crore.

"We have been holding discussions with the finance ministry on the issue and hope to resolve the issue soon. However, if the ministry sticks to its stand, we will have no option but to recover our dues from consumers through a price hike," a petroleum ministry official said.

ONGC had also appealed against the excise duty to both the petroleum and finance ministries, but to no avail. The excise department issued orders to various work centres, including the ONGC Uran plant in Maharashtra.

ONGC then appealed against the order in the Customs, excise and service tax appellate tribunal in Mumbai.

The tribunal in January this year asked the petroleum ministry and the department of revenue to resolve the matter amicably. Subsequently, ONGC has written to the petroleum ministry and finance ministry again to intervene in the matter.