Industry & Economy
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Petroleum
Excise cut bites IOC, BPCL arms
Pratim Ranjan Bose
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Kolkata
March 2
IndianOil and BPCL may have reasons to welcome a cut in excise duty but not their subsidiaries — Bongaigaon Refinery and Petrochemicals Ltd (BRPL) and Numaligarh Refinery Ltd (NRL).
Located in the North Eastern State of Assam, both the companies enjoy the privilege of retaining half of the excise duty collected. The scheme was introduced a few years ago to compensate the refineries in the region for the locational cost-disadvantages.
Naturally, at 8 per cent excise duty the margins of BRPL and NRL used to be bolstered by 4 per cent, but no more. Following the reduction in excise to 6 per cent, the income through excise retention by both the companies would be reduced to 3 per cent.
According to sources, BRPL and NRL incomes will take a beating by about Rs 35-36 crore once the new rates are implemented. Overall, however, both report net positive impacts of Rs 42 crore and Rs 25 crore respectively, comprising benefits accrued through the Union Budget and Rail Budget.
According to a senior BRPL official, the company will benefit by about Rs 35 crore on account of CST on procurement of Ravva crude alone. The company currently pays about Rs 150 crore on CST on crude oil.
Equipped to refine low-sulphur crude, BRPL uses roughly one million tonnes of crude from the Carin operated Ravva oilfield. Another one million tonnes is procured from Assam.
IOC has already proposed merger of the company with itself at a swap ratio of 4:37 (four equity shares of Rs 10 each of IOC for every 37 shares of Rs 10 each of BRPL). The proposal awaits the approval of the Union Government and other relevant authorities.
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