Import duty on oil not to be lowered

The finance ministry has ruled out a reduction in the Customs duty on crude and petroleum products and also turned down a proposal for additional transportation or group-specific subsidies.

It, however, has kept open the option to reduce the excise duties on finished products.

Oil companies also ruled out the possibility of a stabilisation fund, mooted earlier. "There is no support from the government and under the new pricing formula the so-called fund does not make sense," said a senior executive with an oil marketing company.

The proposal to cut duties was discussed at a high-level meeting chaired by Cabinet Secretary BK Chaturvedi. The finance ministry was of the opinion that a reduction in the Customs duty would cause a severe loss to the exchequer, officials said.

It also ruled out increased transportation subsidy, saying that there were refineries in the northeast to take care of the needs of the region.

A proposal for increased subsidy for specific interest groups like fishermen was also turned down, the officials added.

Oil company executives said the situation was getting out of hand. The companies have lost around Rs 200 crore during the last fortnight itself.

"We are hoping that things will improve towards the last quarter of the financial year, though international prices are projected to keep increasing in the coming months," said a senior executive.

Oil companies had approached the government after the last round of price revision seeking duty cuts, since they had breached the permissible 10 per cent band for effecting price increase on diesel, where the under-recovery was estimated at Rs 1.20 per litre.

The last round of revision took place on July 31, and the oil marketing companies are due to effect another revision on Sunday.

The government had cleared a new pricing mechanism for oil companies under which they can alter petrol and diesel prices every fortnight in a band of 10 per cent around the mean of the last three months' rolling average prices and last one year's rolling average process.

The companies will now consider the cost and freight (C&F) price of the products instead of the free on board (FOB) price.