Our Bureau

New Delhi, Aug. 4

THE Parliamentary Standing Committee on Petroleum and Natural Gas has recommended reduction in customs duty on petroleum products, especially petrol and diesel, to five per cent from 10 per cent, to bring it on par with the customs duty on crude.

In its report on pricing of petroleum products presented to the Lok Sabha today, the Committee stated that customs duty was only a mechanism to ensure gains to refining companies. The duty levied on products did not actually add to Government revenues, as product imports were almost nil owing to surplus refining capacity in the country. Moreover, any differential between the customs duty on crude and the customs duty on products would increase the effective tariff protection of the refineries, the Committee said.

Further, the committee felt that in the recent price hike of Rs 2.50 per litre in the case of petrol and Rs 2 per litre for diesel, the substantial contribution Rs 2.20 and Rs 1.06 respectively had been made by the enhanced rates of excise duties.

The price increase owing to global oil price surges had been nil in the case of petrol and 70 paise in the case of diesel.

The recent price rise was mainly due to changes in excise duties on products effected through the Union Budget of 2005-06 and not due to rise in international crude prices, it observed.

As increase in fuel prices, especially diesel, would have a cascading effect on the prices of various essential commodities, affecting the common man at large, the Committee recommended that such increases be kept minimum.

Further, it also recommended a realistic ceiling for refinery margins. The Committee noted that the actual cost of refining and the refining margins within the country were not taken into account while pricing products.

It also recommended that the total share of taxes and duties in the retail selling prices of commonly used fuel, including auto fuels, be kept at reasonably low levels.

Cabinet note on price revision: When asked about the losses suffered by oil marketing companies in the first quarter of the current fiscal, the Petroleum Minister, Mr Mani Shankar Aiyar said the ministry would soon finalise a Cabinet note on oil product prices.

"We have written to the Finance Ministry on the issue and a Cabinet note will be ready soon," he said.

Mr Aiyar said protection of consumer interest was the Government's priority.

(This article was published in the Business Line print edition dated August 5, 2005)
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