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Richa Mishra

New Delhi , Aug 21

THE Petroleum Ministry has said that it is not going to intervene on the issue of applicability of excise duty on petroleum products, particularly kerosene and LPG.

Senior Petroleum Ministry officials said that there is no dispute with the Finance Ministry on the issue. It was entirely up to the Finance Ministry to decide on what basis the excise duty should be levied, whether on transfer price or end price of the product, the officials said.

With their earlier attempts to seek a clarification from the Finance Ministry yielding no results, the oil companies have been looking to the Petroleum Ministry to pursue the matter. The confusion arose when excise authorities started calculating the excise duty on the transfer price and not on the end price, officials told Business Line.

The transfer price is the one at which petroleum products are sold to oil marketing companies (OMCs) by refiners.

It is based on the import parity price. For the four petroleum products - petrol, diesel, LPG and kerosene - it is higher than the price at which the end consumer buys them.

It is understood that oil refiners such as ONGC and Reliance Industries Ltd (RIL) have conveyed to the OMCs that if the situation is not corrected, the liability of any additional excise duty with interest and penalty would have to be borne by marketing companies.

This in effect would mean putting extra burden on the already bleeding OMCs.

IOC, HPCL, and BPCL have registered losses during the first quarter of the current year due to the spiralling international crude prices and the second quarter seems to be following the trend if corrective measures are not taken to cushion the impact of the international price on their bottomline.

The OMCs, on their part, have been demanding that since the prices of LPG and kerosene continue to be administered by the Government, the determination of the assessable value of these two products should be same as prevalent during the administered price mechanism (APM) regime.

The oil companies have been receiving notices from the excise authorities to pay the differential duty with equivalent penalty and interest, the recent one being RIL which has been asked to pay a differential duty of Rs 494.30 crore with equivalent penalty and interest for the period between July 2000 and February 2005 for selling kerosene and LPG to OMCs.

According to industry sources, of the Rs 494.30 crore demanded from RIL, IOC's share would come to Rs 260.12 crore, if the OMC were made liable. Incidentally, the excise department had also sent such notice to ONGC demanding Rs 84 crore.

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