One duty on petro products on anvil

RUN-UP TO THE BUDGET

The finance ministry is expected to do away with the differential import duty structure on crude oil and petroleum products in the forthcoming Budget 2007-08.

At present, the duty on crude oil stands at 5 per cent while petroleum products attract a 7.5 per cent duty.

This differential duty structure provides very high effective protection, around 20 per cent, to oil refineries.

The finance ministry is also expected to notify all petroleum products as declared goods. This will remove the inter-state difference on sales tax.

The proposals were recently discussed at a meeting of the energy co-ordination committee chaired by Prime Minister Manmohan Singh. It is slated to be put up for approval of the committee of secretaries within the month.

Subsequently, the proposal, along with several others, will be brought before the Cabinet Committee of Economic Affairs for approval.

The petroleum ministry has said equalising the duty at 5 per cent will not result in revenue losses but will, instead, reduce refining prices and under recovery claims.

For the financial year 2006-07, under recovery claims are pegged at Rs 49,000 crore (Rs 22,000 crore on account of diesel and petrol, and Rs 27,000 crore on liquefied petroleum gas and kerosene oil).

Significantly, the energy co-ordination committee has agreed on the need to effectively target the LPG and kerosene subsidy. It has also agreed to shift to trade parity prices at the point of sale because the current policy is, at best, an approximation.

"The best way to achieve this is through free market at refinery and retail level," sources said.

OIL FOR ALL'S SAKE

At present, the duty on crude oil is 5% while on petroleum products it is 7.5%

Differential duty structure provides high protection, around 20%, to oil refineries

The ministry is likely to notify all petro products as declared goods to remove the inter-state difference on sales tax

According to the petroleum ministry, equalising the duty at 5% will reduce refining prices and under recovery claims

For 2006-07, under recovery claims are pegged at Rs 49,000 crore (Rs 22,000 crore on diesel and petrol, and Rs 27,000 crore on LPG and kerosene oil)