The Hindu Business Line : Deora urges PM to cut customs duty on crude oil

New Delhi, April 3 With public sector oil companies bleeding because of under-recoveries, the Petroleum Minister, Mr Murli Deora, has asked the Prime Minister, Dr Manmohan Singh, to cut customs duty on crude oil.

A cut in customs duty would bring down the raw material cost of the oil companies, thereby, cushioning them from the surge in international oil prices.

Despite the international crude oil prices hovering over $100 a barrel mark, and Indian basket averaging $99.76 a barrel in March, the oil marketing companies — Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — continue to sell petroleum products below the cost price.

The under-recovery for the current fiscal on the sale of petroleum products — petrol, diesel, LPG and kerosene — is estimated to be Rs 130,000 crore. The oil marketing companies lost Rs 77,304.50 crore in 2007-08 on selling petroleum products below cost price.

The Petroleum Minister met the Prime Minister on Wednesday seeking his intervention for protecting the oil marketing companies. The Indian crude basket on April 2 stood at $96.91 a barrel. Mr Deora told newspersons that, “Just like the Government scrapped import duty on edible crude oil, five per cent customs duty on petroleum crude oil should also be made nil.”

“Oil bonds being given by the Government are not enough,” he said.

During April-December period, the Government issued oil bonds worth Rs 20,333.33 crore. Another Rs 12,675 crore bonds are expected for January-March period.

After considering subsidy contribution from upstream companies — ONGC, Oil India, and GAIL (India) — a gap of over Rs 12,000 crore still remained uncovered.

The Minister said five per cent customs duty on crude oil has fetched more revenues to the Government since the rate was fixed when crude was at $32 a barrel. In April-December period of 2007-08, the Government got Rs 7,804 crore in customs revenue from crude oil.

Currently, oil companies are suffering a revenue loss of about Rs 450 crore a day on fuel sales. The revenue loss on petrol stood at Rs 10.78 a litre and diesel Rs 17.02 a litre. The companies were suffering a loss of Rs 316.06 per LPG cylinder and Rs 25.23 a litre on kerosene.

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