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Govt proposes to exempt of custom duty on crude imports
November, 22nd 2010

THE finance ministry has proposed to exempt crude imports made under adva nce authorisation scheme from levy of national calamity contingency duty (NCCD). At present the levy is being charged as surcharge over and above the customs duty and works out to Rs 51 per metric tonne. Proceeds of this specific levy are used to meet government spendi ng in times of natural calamities like floods, drought and Tsunami.

Crude imported under advanced authorisation scheme is meant for export of refined petroleum produ cts done by both govern ment-owned oil companies and private sector petroleum firms. Domestic crude prod u ced also attracts this levy.

However, the government had exempted companies from payment of this levy on crude produced from 40 domestic blocks. In addition, crude oil from blocks that were put on bidding route under New Exploration Licensing Policy (NELP) also do not attract this levy. The commerce ministry has already supported the oil ministrys demand. Now Tariff Regulation Unit (TRU) under the finance ministry is examining the possibility of exempting crude imports meant for export purposes from this impost. The Directorate General of Foreign Trade (DGFT) under the commerce ministry has argued that levies and surcharges like NCCD and education cess will have an adverse bearing on competitiveness of Indian products in overseas markets.

It has also pointed out that government was committed not to export levies or duties on goods and services. Duty neutralisation schemes like DFIA and advance authorisation were designed to eutralise the adverse impact of these levies.

It is precisely the reason for exempting input imports under the advance authorisation scheme from levy of customs duty, additional customs duty, special additional duty, education cess, anti-dumping duty and safeguards duty.

Government-owned companies like Indian Oil Corporation (IOC) and Hindu stan Petroleum Cor poration (HPCL) that have utilised the advance au thorisation window for its imports, have mainly felt an adverse impact. Even companies like Reliance and Essar have been accessing crude impo rt s under this scheme.

Countrys largest refiner and marketing company, Indian Oil Corporation (IOC) had to fork out about Rs 200 crore as NCCD annually, companys finance director Serangulam V Narasimhan told Financial Chronicle. IOC imported nearly 40 million tonnes of crude in 2009-10. IOC exports several products. Exports of Servo lubricants grew by 58 per cent during 2009-10 after tapping new markets in Indonesia, Vietnam, Nigeria and Oman, as well as the appointment of new distributors in Bahrain and Qatar, IOC chairman B M Bansal said at the company's last annual general meeting. The refiner also exported Paraxylene to Indonesia, Thailand and Malaysia for the first time.

HPCL paid Rs 67 crore as NCCD in last financial year, said a senior HPCL official, requesting anonymity, as he is not authorised to speak to media. The governmentowned refiner imported 12 million tonnes of crude in 2009-10. "The genesis of this (NCCD) was a short time levy since it was introduced in 2003. This adds up as input cost and directly reflects in the price of products when exported," he added. HPCL exports fuel oil, high sulphur gas oil, naphtha, packed bitumen food grade and hexane lube oil base stock. In 2009-10, India imported 159.26 million tonnes of crude, according to oil ministry data. At the same time, it exported 16.54 million tonnes of petroleum products.

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