The Hindu Business Line : `Cutting customs duty to absorb oil price hike won't help'

EVEN as the ruling United Progressive Alliance (UPA) Government is under pressure from the Left parties to slash the customs duty on petroleum crude to absorb the impact of high global prices, the Finance Ministry feels that revenue considerations weigh against this option.

According to a top North Block official, the revenues from import of oil during the current fiscal so far have been a mere Rs 300 crore higher than the amount mopped up in the same period last year. This is notwithstanding the fact that there has been a 57.8 per cent jump in oil imports during April-September 2004, at $14.54 billion, against $9.21 billion in the corresponding period last year. In rupee terms, the increase works out to 54.5 per cent.

The mere Rs 300-crore additional customs revenue from oil is seen to be all the more surprising because the country hardly imports any petroproducts (diesel, petrol, etc) and imports are virtually confined to crude, on which the duty has been left unchanged at 10 per cent.

But the official claimed that the higher value of oil imports on account of soaring crude prices this year has not particularly benefited the exchequer, as one would ordinarily believe. The reason, he said, was duty-free imports of crude under the advance licence scheme.

"The additional collections from crude imports have been only Rs 300 crore higher this fiscal because a large quantity has been imported through the advance licence route," the official added. Under this scheme, refineries have been importing crude at nil duty for manufacture of diesel and other petroproducts for exports.

Overall customs duty collections during the first half of the current fiscal have been 8.84 per cent higher, at Rs 25,216 crore, compared to Rs 23,167 crore for the same period of the previous fiscal. Again, this is much lower than the 31.5 per cent increase in the rupee value of total imports this year (till end-September).

On the excise front, revenues have been higher by 10.11 per cent, at Rs 44,494 crore, against Rs 40,409 crore during April-September 2003. The growth has been lower than the 18.21 per cent increase budgeted for the current fiscal. The official admitted that the current revenue trends indicated a shortfall, despite buoyant industrial performance.

"The Revenue Department will undertake sectoral and region-wise analysis to determine the reasons for the shortfall. We will also put in place an institutional mechanism to review trends on a monthly basis, so as take immediate corrective action. We are not sure whether the shortfall is due to lower production in certain industry segments or because of evasion", he said.

Meanwhile, the Finance Ministry has said that it has been able to raise Rs 3,500 crore of "recoverable, undisputed tax arrears" so far this fiscal. "We had estimated that the arrears of direct taxes that are not under any legal dispute and hence recoverable amount to about Rs 17,000 crore. Of this, we had budgeted to collect Rs 7,000 crore in the current fiscal alone. It would seem that we will be able to more than meet this target", the official added.

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