Thursday, April 3, 2008

Deora asks PM to cut customs duty on crude oil

Petroleum Minister Murli Deroa asked PM Manmohan Singh to cut customs duty on crude oil to avert financial bankruptcy of public sector oil companies. With crude oil prices hovering over USD 100 a barrel mark, Deora had a s-o-s meeting with Prime Minister on Wednesday evening to seek his intervention in protecting the fuel retailers Indian Oil, Bharat Petroleum and Hindustan Petroleum from bankruptcy who who face a whopping Rs 1, 300 billion revenue loss on sale of fuel in current fiscal.

`Just like the Government scrapped import duty on edible crude oil (in the meeting of Cabinet Committee on Prices on Apr. 01), 5% customs duty on petroleum crude oil should also be made nil,` Deora told reporters in New Delhi. IOC, BPCL and HPCL, who together lost Rs 773.05 billion on sale of petrol, diesel, domestic LPG and kerosene in 2007-08, are projected to lose Rs 1,300 billion in current fiscal.`Oil bonds being given by the Government are not enough,` he said.

During April-December period, the Government gave oil bonds worth Rs 20,333.33 crore and another Rs 126.75 billion bonds are expected for January-March period.After considering subsidy contribution from companies like ONGC and GAIL, a gap of over Rs 120 billion still remained uncovered.Deora asked Prime Minister to raise the quantum of oil bonds after Singh is believed to have rejected the idea of nil customs duty on petroleum crude oil.The oil PSUs currently lose about Rs 4.50 billion every day on fuel sales as they have not been allowed to pass on the increase in cost of raw material to the consumers.

They lose Rs 10.78 a litre on petrol, Rs 17.02 on diesel, Rs 316.06 per LPG cylinder and Rs 25.23 a litre on kerosene.Deora said the five percent customs duty on crude oil has yielded more revenues to the Government since the rate was fixed when crude was at USD 32 per barrel.In April-December 2007-08 fiscal, the government got Rs 78.04 billion in customs revenue from crude oil. In 2006-07 full years, customs duty on crude oil gave Rs 100.43 billion.`Of the Rs 45.52 a litre price of petrol in Delhi, only Rs 22.02 per litre goes to oil companies and the rest is all duties. Similarly, taxes and duties make 32 % of the diesel selling price of Rs 31.76 per litre,` he said. A cut in customs duty on crude oil would reduce the raw material cost of oil companies, thereby cushioning them from the spike in international oil prices.

The Indian basket of crude oil averaged USD 99.76 per barrel in March.

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