Indian Oil Corp, the nation's largest oil firm, is looking at changes in tax laws to buy diesel from Reliance Industries to meet the fueldeficit.

"We have appealed to the Government to do away with double taxation on products bought from Reliance's Jamnagar refinery," IOC Chairman Sarthak Behuria told reporters here.

IOC, Bharat Petroleum and Hindustan Petroleum need just over 2.5 million tons of diesel during the remaining part of the fiscal and if they are allowed to buy from Reliance it would help them save Rs 650-700 crore.

Reliance has converted Jamnagar into an only-for-exports unit, thereby getting tax incentives like exemption from payment of income tax and duty free import of raw material. An Export Oriented Unit (EOU) is discouraged from selling products in domestic market through levy of double taxation.

The state-run firms would have to pay Rs 9.51 a litre more in taxes on petrol and Rs 2.85 per litre on diesel if they buy fuel from Jamnagar.

Sales from an EOU or a unit in Special Economic Zone are treated as imports and are first levied customs duty, then additional customs duty and then CVD. A 3 per cent cess is levied on the aggregate of these. On top of this, additional excise duty in charged and a 3 per cent cess is levied on aggregate of these.

Multiple cess is not levied on direct imports. "There is a premium on imports and it is beneficial for us to buy from Reliance. We hope the Government does something about double taxation," Behuria said.

Reliance President (Refinery Business) P Raghavendra said the company was willing to supply whatever quantities that state-run firms needed provided double taxation was done away with.