The Hindu Business Line : Oil Ministry urges Rangarajan panel to submit report soon

WITH the Budget exercise gaining momentum, the Petroleum Ministry has urged the Rangarajan Committee to submit its report at the earliest if the committee decides to recommend tax and duty proposals relating to the sector.

To ensure that the oil companies make reasonable return on their investments, the Ministry has suggested to the committee headed by Dr C Rangarajan to consider reduction in the customs duty on crude oil and also on petroleum products - petrol and diesel.

The Ministry has proposed rationalisation of duties and also considering specific duties against ad-valorem. Industry has recommended that the customs duty on imported crude oil be reduced to nil and the duty structure of petroleum products be fixed in such a way that the overall tariff protection is maintained at 10 per cent.

According to sources, the Government would take a final view after the receipt of the committee's recommendations, which is expected soon.

Sources indicated that the report could be submitted in two parts. While the first part would suggest the duty structure, the second part would propose a long-term policy.

Oil companies have been suffering huge under recoveries during the current financial year on the four petroleum products - LPG, kerosene, petrol and diesel. In the case of Indian Oil, including IBP Co Ltd, which accounts for 55 per cent of the state-owned unit's market share, the under recoveries on these four products in April-December 2005 stood at Rs 9,020 crore.

The under recovery on LPG and kerosene stood at Rs 5,350 crore and on petrol and diesel at Rs 3,670 crore.

The loss for the third quarter of the current fiscal of Indian Oil stood at Rs 6 crore and IBP at Rs 96 crore. The under recoveries have arisen mainly due to prices not being revised upwards in line with the international prices of the petroleum products and therefore, requiring reduction in customs duty on crude oil and petroleum products (petrol and diesel) and rationalisation of duties, sources said.

In fact, the Expert Technical Group (ETG), in its report on deregulation of the hydrocarbon sector, had recommended that the customs duty on crude oil imports be gradually reduced to nil. The present rate of duty is five per cent. As regards the differential in the rates of duty between crude oil and petroleum products, the ETG has suggested that it should be kept at 10 per cent minimum.