Customs, excise duty cut on crude oil

In a major restructuring in the oil sector, Finance Minister P Chidambaram today substantially cut customs and excise duties on crude oil and petroleum products but the subsequent benefits would not be passed on to consumers.

At the same time, a road development cess of 50 paise a litre has been imposed on petrol and diesel.

"The proposed changes are revenue neutral, and I have been assured that there will be no increase in the retail prices of these products as a result of the changes in the duty structure," he said in his budget speech.

The reduction in duties on domestic cooking gas (LPG) and kerosene for public distrbution system will help oil companies contain their losses they were incurring because of not being allowed to change retail prices in line with the change in prices of raw materials. Besides, the government has left subsidies on domestic LPG and kerosene unchanged.

Customs duty on crude oil has been halved to 5% while that on kerosene for public distribution system and LPG  for domestic use has been slashed from 5% to nil. Excise duty on the two has also been brought down to nil, from 12% (kerosene) and 8% (LPG) respectively.

Import duty on petrol and diesel has also been reduced from 15% to 10% each while on the excise duty front, the government, with a view to check the impact of the volatility in international oil prices, moved from ad valorem duty structure on petrol and diesel to a combination of lower ad valorem duty plus specific duty.