The Hindu Business Line : PetroFed urges Govt to save oil retail companies

With the Indian basket of crude oil at $68.9 a barrel in the second fortnight of April 2006, and prices going north, the oil industry has urged the Government to work out measures to save the retail companies.

PetroFed, a body representing the oil industry, said that if the Dr C. Rangarajan Committee report is implemented, it translates into an increase of Rs 8.84 a litre in the price of petrol and Rs 8.89 a litre for diesel at Delhi.

The current Delhi retail prices are Rs 43.49 for petrol and Rs 30.45 for diesel. "Since the common man may not be able to suffer such a hefty increase in one go, it may not be possible for the Government to provide succour to the oil companies and save them from sickness. Innovative ways have to be found for `equitable sharing' of the burden of the increasing oil prices," PetroFed said.

Making a few specific suggestions to soften the sufferings of the oil companies and the consumers, in the event of a pass through of high crude oil prices, PetroFed has said that the excise duty on petrol and diesel needs to be lowered sharply. Currently, the excise duty on petrol works at Rs 15 a litre and Rs 5.10 on diesel, inclusive of two per cent education cess.

It has recommended removal of special additional excise duty on petrol of Rs 6 a litre, which can make a substantial difference in petrol pricing.

The rate of sales tax in the country is a weighted average of 26.7 per cent for petrol and 21 per cent for diesel.

It varies from 20 per cent to 34 per cent in various States in the case of petrol and from 8.8 per cent to 31 per cent in the case of diesel.

There is a strong case for rationalisation as recommended by the Rangarajan Committee and the Empowered Committee of State Finance Ministers on VAT.

The mere reduction of sales tax to a uniform 12.5 per cent or 12 per cent would substantially reduce by over 30 per cent the burden of increase in retail selling price of diesel (and petrol) for the consumer, PetroFed said.

It has urged the Government to notification of diesel as "declared goods".

Since diesel is used extensively in agriculture, transportation of agricultural produce, and mass transportation, a hefty increase in diesel selling price can trigger inflationary tendencies, it added.

A uniform sales tax across the country of four per cent on diesel can result in more than 60 per cent reduction in the necessitated increase in product price, it said.

PetroFed also said that subsidies should be eliminated and if not in one go, it should be limited to below poverty line families.