• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Our Bureau

New Delhi , Nov 28

THE Government on Friday decided to ban import of kerosene by private companies in a move to curb adulteration of diesel.

Under the new dispensation, kerosene can be imported only through State trading enterprises - Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and IBP Ltd.

Diesel sales have witnessed a 3.2 per cent decline during the last six months over the corresponding period last year. This is despite a good monsoon and boom in automobile sales.

On the other hand, kerosene imports have touched 600,000 tonnes in the first six months of the current fiscal, compared to around 700,000 tonnes in the whole of last year.

The incentive to adulterate diesel with kerosene lies in the fiscal regime.

While kerosene attracts duty of 20 per cent, diesel attracts around 25 per cent, a key incentive for adulteration of diesel with kerosene.

In this regard, the Petroleum Ministry is planning to seek higher taxation on kerosene as part of the Budget proposal to the Finance Ministry.

A study by the Petroleum Ministry on the drop in demand for diesel in the country over the last two years has shown that the slide is `locational' and not `sector-specific'.

Tamil Nadu, Gujarat, Madhya Pradesh, Chhattisgarh and Maharashtra have shown the maximum reduction in consumption of domestically produced diesel in a comparison between 1999-2000 and 2002-2003.

These States qualify as coastal areas or fall under the natural geographic area of sale for Reliance Industries Ltd's (RIL) 27-million tonne refinery at Jamnagar in Gujarat, which commenced production in 1999.

For a refinery, the natural geographic area is defined by the radius beyond which the retail cost at a location would be cheaper from alternative refineries or import locations due to lower cost of transportation.

In the past, IOC had alleged that RIL sold light diesel oil (LDO) as high-speed diesel (HSD) to bulk consumers, who constitute roughly 20 per cent of the total sale in a State.

Both the products have roughly the same properties. This distortion was subsequently corrected in Budget 2003.

Till this year's Budget announcement in March, LDO attracted less Central taxation than HSD. Also, public sector marketing companies sell diesel at a price that is averaged across the country whereas direct imports by bulk consumers are cheaper in coastal areas.

For the periods under comparison - 1999-2000 and 2002-2003 - the demand for diesel dropped by seven per cent to 36.49 million tonnes in 2002-2003.

Gujarat, Madhya Pradesh and Maharashtra accounted for 4.9 per cent of the drop and Tamil Nadu for 1.3 per cent.

Article E-Mail :: Comment :: Syndication

Stories in this Section
EPFO trustees seek to scrap minimum age for pension

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line