Oil Min seeks lower duties to avoid price rise

The petroleum ministry has sought a reduction in duties on crude oil and petroleum products to avoid more of an increase in fuel prices, necessary because of spiralling global oil rates.

“Industry wants a reduction in excise and Customs duties. They regularly demand it, so we will communicate this to the finance ministry that there should be rationalisation in duties,” Petroleum Secretary S Sundareshan said here today.

The ministry is seeking a reduction in Customs duty on crude oil, and excise duty on petrol and diesel. In the Budget for 2010-11, the government restored a 5 per cent import duty on crude oil while increasing the duty on petrol and diesel from 2.5 per cent to 7.5 per cent. Excise duty on petrol and diesel was also increased by Rs 1 per litre, taking it to Rs 14.35 and Rs 4.60 a litre, respectively.

Prices of diesel, kerosene and LPG, which together account for 60 per cent of the consumption of petroleum products, have not been increased since June 25. Currently, the oil marketing companies (OMCs) — Indian Oil, Bharat Petroleum and Hindustan Petroleum — are incurring an underrecovery (revenue loss) of Rs 6.80 on every litre of diesel, Rs 18.66 on every litre of kerosene and Rs 366 per cylinder on domestic LPG.

Petrol prices have been decontrolled with effect from June 26, 2010 and the OMCs have taken a series of increases. In spite of this, they have failed to pass on the entire cost increase and are currently incurring a loss of Rs 1.22 a litre. The three firms are projected to lose Rs 73,600 crore in revenues during the current financial year.

States urge Centre to make duty changes
The state governments today urged the Union government to abolish the import duty on petroleum products and suggested excise should be levied at a flat rate, instead of the current practice of imposing taxes on an ad valorem basis.

“The rise in the prices of petroleum products should be controlled. The import duty of 5 per cent introduced two years ago should be removed… While the price increase due to international price movements is to some extent understandable, the commensurate increase in taxes, which are levied ad valorem can be avoided,” Bihar’s Deputy Chief Minister and Finance Minister Sushil Modi told reporters after a pre-Budget meeting with Finance Minister Pranab Mukherjee.