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Govt may slash duty on petrol, diesel

October 15, 2004 14:24 IST

The Cabinet Committee on Economic Affairs may consider slashing customs duty on petrol and diesel from 15 per cent to 10 per cent, besides exempting kerosene and LPG from excise levy, as part of efforts to spare consumers from the impact of spurt in global crude prices.

A proposal for a downward revision in both excise and customs duty was earlier considered by the Committee of Secretaries while exploring the future course in view of international oil prices touching $54 a barrel mark, sources said.

Petroleum Minister Mani Shankar Aiyar had met Prime Minister Manmohan Singh on Thursday, presumably to seek his intervention for cutting duties in absence of which a major burden would have to be borne by the consumers.

The petrol prices should be increased by Rs 1.88 per litre and diesel by Rs 3.30 a litre in step with the global trend in case government does not take part of the burden by cutting duties and ask oil companies to share some pressure.

This is apart from the burden for subsidised LPG and Kerosene that may require a price hike of Rs 158 per cylinder and Rs 11 per litre, respectively, if government does not work out other options, sources said.

According to the proposal considered by the CoS, customs duty on LPG and kerosene is to be brought down from 20 to 15 per cent, while that on crude halved to 5 per cent.

The finance ministry as such has sacrificed about Rs 5,300 crore (Rs 53 billion) by slashing duties on various products in two instalments and government has prevented oil PSUs from hiking prices since August 1 despite pressure of shooting international prices.

"Yes," was Petroleum Minister Mani Shankar Aiyar's response to queries whether the CCEA was discussing ways, including duty cuts, to limit the impact of surge in crude prices.

Aiyar said the burden of crude price rise would have to be equitably shared by all stakeholders - the consumers, oil firms and the government by way of cut in revenues (when duty is cut).

State-run oil firms have lost Rs 2,273 crore (Rs 22.73 billion) on selling petrol and diesel below the international price this fiscal and another Rs 4,992 crore (Rs 49.92 billion) on LPG and kerosene. If either duties are not cut or prices not raised, the revenue loss of oil firms would reach a staggering Rs 4,300 crore (Rs 43 billion) on petrol and

diesel and Rs 13,250 crore (Rs 132.50 billion) by the end of 2004-05 fiscal.

Even within the limited price band, petrol prices would have to be increased by Rs 0.65 per litre and diesel by Rs 1.60 a litre.

"Discussions are on and a decision would be announced by this evening," Aiyar said.

He said the decision on whether prices of petrol, diesel, LPG and kerosene would be altered would be announced by this evening.



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