The Hindu Business Line : Petro goods: Finance Ministry urged to restore excise on end price

THE Petroleum Ministry has requested the Finance Ministry to restore the applicability of excise duty on petroleum products, particularly kerosene and liquefied petroleum gas (LPG), on the market price of the subsidised product.

The issue arose after the excise authorities started calculating the duty on the transfer price and not on the end price. A senior Petroleum Ministry official told Business Line that in order to earn higher revenue, the Finance Ministry was calculating the excise duty on transfer price, that is the price 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.

Pending issue: This is a pending issue as under the current Budget, the excise duty on both kerosene and LPG were slashed to nil from the prevailing 12 per cent for kerosene and 8 per cent for LPG, the official said. 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 the same as prevalent during the administered price mechanism regime.

Differential duty: It is understood that oil refiners such as ONGC and Reliance Industries Ltd (RIL) have conveyed to the OMCs that if the anomaly was not corrected, the liability of any additional excise duty with interest and penalty would have to be borne by the marketing companies. This, in effect, would mean putting extra burden on OMCs. The oil companies have been receiving notices from the excise authorities to pay the differential duty with equivalent penalty and interest.

RIL had 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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