The Hindu Business Line : Deora pitches for removal of excise duty on diesel

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New Delhi Jan. 23 With the countdown on for Budget 2007-08, the Union Petroleum Minister, Mr Murli Deora, today sought removal of excise duty on diesel in a phased manner. In his meeting with the Union Finance Minister, Mr P. Chidambaram, the Petroleum Minister also sought infrastructure status for oil and gas exploration business and pipelines.

The Petroleum Minister after his meeting with the Finance Minister told newspersons "Yes, we are for reduction in excise duty on diesel. Despite the fall in international crude prices, oil companies continue to make a loss of 50 paise a litre on diesel. Besides, such a duty reduction would help contain inflation." Mr Deora declined to elaborate further on his Ministry's demands for the Budget.

Infrastructure status for oil and gas exploration business and pipelines was sought to encourage prospects in unexplored basins and promoting use of environment friendly natural gas as fuel. The extension of infrastructure status would entitle projects to avail of a 10-year income tax holiday.

Tax holiday

Tax holiday for LNG import and re-gasification projects, cross-country pipelines for crude, gas and petroleum products, and crude and product import facilities have also been sought.

A senior Ministry official said, "Clearly, the Finance Ministry has benefited from the surge in international oil prices." The Petroleum Ministry is understood to have sought Re 1 per litre cut in excise on diesel in the forthcoming Budget.

Currently, the excise duty on diesel is 8.16 per cent plus Rs 3.32 a litre — the two together translating into a total levy of Rs 4.98 per litre. Last year, excise duty on diesel was Rs 3.41 per litre.

Elaborating, the official said revenues from excise duty on diesel have increased to Rs 24,214 crore in 2005-06 from Rs 16,338 crore in the previous year. Revenue on diesel as percentage of total excise revenues has increased to 22 per cent from 16 per cent. As regards cess on crude, the official said, "Finance Ministry is also getting increased revenues from raising cess on domestic crude oil to Rs 2,500 per tonne from Rs 1,800 per tonne, previously."

Specific duties

This is expected to garner Rs 6,700 crore during the current fiscal as against Rs 5,100 crore previously, the incremental revenues more than compensating for the excise duty cut, he added. Further, the Petroleum Ministry has also sought a shift to specific duties on fuel from the current mix of ad-valorem and specific duties. The current excise duty on petrol is 8.16 per cent of ex-factory price plus Rs 13.26 a litre.

The Ministry has sought `declared goods' status for natural gas/LNG, which would mean that the fuel attracts a uniform state sales tax rate of four per cent. The Ministry was also pitching for withdrawal of service tax on `Survey and Exploration of Mineral' to promote domestic E&P sector.

Further, zero customs duty on capital goods imported for new refineries and refinery expansion have also been sought. The Ministry also wanted basic customs duty reduced on projects imports to zero for crude, product and gas pipelines, and CNG/auto LPG infrastructure.

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