The government had cut customs duty on crude oil imports to zero from 5 per cent in June 2011 when rates zoomed to over USD 100 per barrel. But with oil prices hovering at USD 30 a barrel now, the duty may be back, official sources said.
As the government looks to shore up its revenue without hurting economic growth, reimposing import duty on crude oil presents a viable alternative the Budget 2016-17 to be presented on February 29, the sources said.
Petrol and diesel currently attract 2.5 per cent import duty. This duty differential is maintained so as to protect domestic industry by making import of product costlier as compared to domestic manufacturing.
If import duty on crude oil is raised in the budget for 2016-17, it would go up on allied products too from 2.5 per cent to 7.5 per cent, sources said.
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At USD 30 per barrel crude oil price, 5 per cent customs duty will fetch the government close to Rs 18,000 crore at current levels of imports.
Sources said this mop up may help offset the loss of revenue the government may face because of likely cut in cess on domestic crude oil.
The Budget may announce an ad valorem rate of cess instead of Rs 4,500 per tonne fixed levy currently.
The ad valorem rate of cess will results in higher payouts when prices are high and lower when rates fall.
With oil prices dropping to 12-year low of under USD 30 per barrel, the cess translates into one-third of the realisation going away in just one levy.
The Budget may fix the levy at around 8-9 per cent of the crude oil price to provide relief to domestic producers, sources said.