The Hindu Business Line : ‘Oil duties rejig to result in Rs 22,660-cr revenue loss’

New Delhi, June 4 To work out the new petro price regime, the Finance Ministry on Wednesday came up with slew of duty changes to improve the realisation for oil marketing companies (OMCs), which have faced the brunt of the surge in international crude oil prices.

The duty changes would result in an estimated revenue loss of Rs 22,660 crore to the exchequer for the remaining 10 months of the current fiscal. Briefing reporters on the duty changes, the Revenue Secretary, Mr P.V.Bhide, said that the customs duty on crude has been reduced from five per cent to ‘Nil’.

Also, customs duty on diesel and petrol has come down from 7.5 per cent to 2.5 per cent. For other petroleum products, the customs duty has been reduced from 10 per cent to 5 per cent.

On excise duty, Mr Bhide said that excise duty on unbranded petrol and diesel have been reduced by Re 1 per litre. “The current excise duty on petrol and diesel is Rs 14.35 and Rs 4.6, respectively. It will come down by Re 1 per litre,” he said.

The Revenue Secretary said that under-recoveries of Rs 2,45,300 crore, as estimated by Petroleum Ministry for 2008-09, is proposed to be covered through cut in duties (Rs 22,660 crore), increase in retail selling prices which will get an additional Rs 21,123 crore, upstream and oil marketing companies together will contribute Rs 65,000 crore from margins they gain on higher prices and oil bonds will be issued to the tune of Rs 94,600 crore. “There will still be uncovered gap of Rs 29,000 crore,” Mr Bhide said.

Mr Bhide said that the duty changes are effective immediately and the notifications have been issued. He, however, declined to go into matters on how the Centre plans to make good the estimated Rs 22,260 crore revenue loss arising from duty cuts.

“Whether we will make it good or absorb by expenditure cuts, I am not going to indicate just now. No additional measures have been taken or announced (to make good the revenue loss). Let us see how buoyancy works. Let us wait and watch,” he said.

Of the estimated revenue loss of Rs 22,660 crore, Mr Bhide said that the revenue loss for Centre from customs duty cut on crude would be about Rs 15,500 crore, and that from other petroleum products would be Rs 500 crore.

Official sources said that the revenue loss has been estimated on the basis of Indian crude basket price of $125.25 a barrel on May 21. The excise duty cut on petrol and diesel is estimated to result in revenue loss of Rs 6,660 crore in the remaining 10 months.

States sales tax

On whether the Finance Ministry has asked States to reduce sales tax on petrol and diesel, Mr Bhide said that the Finance Ministry has not made any such move as yet.

In 2007-08, the Centre’s central excise collections from petroleum sector stood at Rs 60,298 crore as compared with Rs 57,856 crore in the previous year. The Centre’s customs duty revenues from the petroleum sector in 2007-08 stood at Rs 18,190 crore (Rs 14,004 crore).

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