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Tuesday, Jun 04, 2002

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Petro price hike will result in higher revenues to States

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WHY has the Finance Ministry undertaken a `revenue neutral' approach while dealing with excise cuts on petro-products and reduced excise duties on petrol and deisel only by 2 per cent?

This, when the revenue estimates from petro-products is estimated to rake in around Rs 4,000 crore over the budgeted Rs 44,000 crore for this fiscal, based on a crude price of close to $24 per barrel. The oil sector accounts for a third of the total excise revenues collected by the exchequer.

In short, a steep hike has been thrust upon the consumer since the Government is not confident of the estimated revenues. This hike would mean higher revenues to the States as well since the sales tax is on an ad valorem basis.

Sources indicate that the conservative approach on the part of the Finance Ministry is for two reasons. First, it has conceded to pay upfront Rs 2,000 crore to the oil marketing companies.

Secondly, it has internally projected a shortfall of Rs 1,500 crore in revenues on the budgeted estimate of Rs 44,000 crore, corresponding to a crude procurement price of $20 per barrel for the entire year.

This estimate is based on revenues garnered during the last two months, officials said. Further, it has projected duty-paid import of 83 million tonnes crude with 3 million tonnes coming in duty-free through use of draw back licences. During the last two months, crude prices have ruled high, thus making it advantageous for importers to utilise licences. However, the loss on this count is only in the region of Rs 300 crore per annum.

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Petro price hike will result in higher revenues to States

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