In a bid to augment the realisations of state-owned oil marketing companies (OMCs) in the wake of the unprecedented surge in global oil prices, the Government on Wednesday exempted crude oil from customs duty, slashed the import duty on other petroleum products and marginally reduced the excise levy on HSD (high speed diesel) and petrol by Re. 1 a litre.
The duty changes, notified and effected at the request of the Ministry of Petroleum and Natural Gas to bail out the OMCs which have been reeling under the burden of huge under-recoveries, are estimated to result in a revenue loss of about Rs. 22,660 crore for the remaining ten months of the current fiscal.
In an almost simultaneous briefing here as the hike in fuel prices was being announced by Petroleum Minister Murli Deora Revenue Secretary P. V. Bhide said the Government had decided to completely exempt crude oil imports from the customs duty by bringing it down from five per cent to nil. The revenue loss to the Central Exchequer on this account alone would be Rs. 15,500 crore.
Alongside, the customs duty on HSD and petrol, he said, had also been scaled down to 2.5 per cent from 7.5 per cent while the duty on imports of other petroleum products such as aviation turbine fuel (ATF) and naphtha for non-fertilizer use stood reduced to five per cent from 10 per cent.
While the revenue loss owing to the reduction in customs duty on these other petroleum products is estimated at Rs. 500 crore, the Re.1 excise duty cut on each litre of petrol and diesel is estimated to lead to a revenue loss of another Rs. 6,600 crore, which together add up to a loss of Rs. 22,600 crore in revenue during the balance part of 2008-09.
Apart from these changes, the under-recoveries by the OMCs adding up to Rs. 1,35,000 crore will have to be partly compensated by the issuance of oil bonds to them during the remaining three quarters of the fiscal year.
With all stakeholders sharing the harsh burden of the oil price hike, the Reserve Bank of India has also chipped in to help the cash-strapped OMCs.
The central bank has provided relief to the oil companies on the liquidity front through its recent move to buy oil bonds which, in turn, would help OMCs import crude in sufficient quantities in keeping with the countrys requirements.
With the view to addressing liquidity problem effectively, the RBI and oil companies have entered into an arrangement since yesterday [Tuesday] as per which the [oil] bonds will be disposed by companies in favour of the central bank, Petroleum Secretary M. S. Srinivasan said.