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Specific duty for petrol, diesel likely

Hema Ramakrishnan

NEW DELHI, Dec. 20

TO cushion the impact of volatility in global crude prices on consumers, the Kelkar panel on indirect taxes is set to recommend specific duty rates for petrol and high speed diesel (HSD) in its final report to be submitted early next week, sources said.

The recommendation, if accepted by the Government, will benefit consumers since the existing ad valorem duty structure bloats global price fluctuations for the end user. In other words, the Centre ends up benefiting from inflation in global crude prices as well as devaluation in the rupee. Currently, petrol and HSD attract an ad valorem duty rate of 28 per cent and 14 per cent respectively.

The road-map for customs duty structure on petro-products in the original consultation paper is also set to undergo changes. The panel has now decided to recommend a reduction in the customs duty on crude from the existing 10 per cent to 8 per cent in 2003-04. The rate is proposed to be pruned to 5 per cent in 2004-05 and will stay at the same level in the 2005-06 and 2006-07.

For other petro-products, the committee will propose a reduction in import duty from the existing 20 per cent to 15 per cent in 2003-04, 10 per cent in 2004-05 and 8 per cent in 2005-06 and 2006-07.

In other words, the duty differential between crude and products will be 7 per cent in 2003-04. It will narrow down to 5 per cent in 2004-05 and further to 3 per cent in the next two years.

The proposal is at variance with the consultation paper which recommended a 5 per cent duty differential between crude and products right at the outset (i.e. in 2003-04).

The final recommendation will come as a reprieve for domestic oil refineries which apprehended a squeeze in their profit margins with the narrowing of the duty differential.

The Petroleum Ministry had also made out a case for a higher duty differential between crude and products atleast in the near term.

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