Industry & Economy
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Petroleum
Big disappointment on oil front
Raghuvir Srinivasan
BIG disappointment was in store for those who expected the Union Finance Minister to rationalise duties on petroleum products. Far from it, Mr Jaswant Singh has increased the additional duty on petrol and diesel by Re 0.50 to Rs 1.50 per litre. This is meant to finance the ongoing road development projects.
There is no mention of a possible movement towards a specific duty regime from ad valorem duties nor is there any intention of relieving the burden on the consumer by reducing the specific duty of Rs 6 levied by Mr Yashwant Sinha in the last Budget. The Government is raking it in both ways - the rising price of crude oil is bringing in higher import duty revenues even as the excise duty on products remains at high levels.
This issue may have to be soon addressed if global oil prices continue to climb as they are doing at the moment. The Government may be forced to absorb a part of the increase by restructuring the duty regime.
The Finance Minister has also livened up the debate on gas prices by lowering import duty on LNG regasification equipment from 25 per cent to just 5 per cent. This is a significant move what with the Dahej LNG project of Petronet LNG in the process of being commissioned. The duty cut is likely to aid this project and help Petronet in pricing its gas at more competitive levels. The Government's move now ought to be seen in the context of the debate on the relative prices of gas from this project and from the recently struck reserve of Reliance Industries in the deep-waters of the Krishna-Godavari basin.
There is also a minor increase in input costs for refineries following the imposition of a temporary duty of Rs 50 per tonne on domestically produced crude oil. This duty will go to the credit of the National Calamity Contingency Fund and will last till February 29, 2004. Oil produced from the production sharing contract fields (joint ventures) and blocks under the New Exploration Licensing Policy are exempt from this levy, which effectively means that only the producing fields of ONGC and Oil India will come under its purview.
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