The Hindu Business Line : Specific-duty regime sought for crude, petroleum products

PRESSURE is mounting on the Finance Ministry to move away from the current ad valorem import duty regime for crude oil and petroleum products to a `specific duty' structure. The latest demand for such a move is understood to have come from the Ministry for Petroleum and Natural Gas.

Private refiners had earlier urged the Government to consider the adoption of a specific duty regime, which they felt would avoid complexities and litigations. Besides the introduction of such a regime, the nodal Ministry is also understood to have pitched for specific excise duties on petroleum products in its Budget wish list to the Finance Ministry.

Ad valorem duties are levied as a fixed percentage on the value of the product. As product prices keep fluctuating, the duty payment levels also change.

On the other hand, in a specific duty regime, a fixed amount is collected as duty irrespective of the changes in the prices of the product. The excise and customs duty structure for crude oil and petroleum products was on a specific basis up to February 1994. Since March 1994, it has been fixed on an ad valorem basis.

Informed sources said that the Petroleum Ministry had argued that the changes to the ad valorem system have led to large scale litigation on account of disputes on the elements, which constitute assessable value, particularly the customs valuation., resulting into the blockage of large amounts of oil industry with the Customs department.

The Petroleum Ministry is understood to have highlighted that the volume of transactions isare very high andthat the prices of crude oil and petroleum products are highly volatile. It has been submitted that this complicates the administration of duty payments, which leads to litigations. The issue of withdrawal of the warehousing facility for petroleum products for the purposes of Central excise has also been brought to the notice of the Finance Ministry.