Financial Daily from THE HINDU group of publications
Wednesday, Jun 14, 2006
Financial Daily from THE HINDU group of publications Wednesday, Jun 14, 2006 |
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Petroleum Industry & Economy - Excise and Customs Government - Politics Cabinet refers LNG duty revision issue to GoM Richa Mishra
What they say Oil Ministry says duty revision not possible only for power sector. Finance Ministry: Cut in customs duty on LNG will distort duty structure and result in revenue loss of Rs 1,000 crore a year. Power Ministry contends waiver of customs duty will lead to enhanced supplies and allow power generation plants to reach full production capacity.
Our Bureau New Delhi , June 13 Revision of import duty and domestic levies on liquefied natural gas (LNG) may take a little longer with the Union Cabinet referring the matter to a Group of Ministers (GoM). A proposal to this effect was taken to the Cabinet recently seeking waiver of customs duty on LNG from the present rate of five per cent as well as to accord `declared goods' status to the product. Gas-based power plants would end up being an important beneficiary of any cut in customs duty or specifying LNG as `declared goods'. According to official sources, the Petroleum and Finance Ministries have voiced their concerns on the proposal of the Power Ministry, stating that there is no way to ensure that such benefits would be passed on to the consumers. At present, States levy an average duty of between five per cent and 15 per cent on natural gas. Under the Central Sales Tax Act, whenever an item is included in the `declared goods' list, States are required to bring down the tax on it to four per cent. As per estimates the waiver in customs duty would effect corresponding reduction to the tune of six paise per unit in fuel cost for power generation.
Duty cuts
The duty cuts were to be applicable only for supplies made to gas-based power generation plants and provide the much-needed impetus to generation by reducing fuel cost, sources added. According to the Petroleum Ministry, it would not be feasible to restrict the duty revision only to the power sector as other sectors like fertiliser that are dependent on gas would also seek similar exemptions. It is very difficult to distinguish the demand utilisation of LNG for the two sectors, the Ministry is understood to have argued. The Finance Ministry is understood to have said that reduction on customs duty on LNG will distort the duty structure and involve a revenue loss of close to Rs 1,000 crore per annum. Customs duty on LNG should be examined in the context of overall duty structure of petroleum products and not in isolation, the Finance Ministry is said to have argued. Besides, LNG is not freely importable and there is wide fluctuation in its prices. The Power Ministry on the other hand has been arguing that waiver of customs duty will lead to enhanced supplies and in turn allow power generation plants to reach their full production capacity. India has a demand of around 150 million standard cubic metres per day (MSCMD) of natural gas against a supply of around 90 MSCMD. The share of natural gas in the country's energy basket is only around 8.9 per cent, against the world average of around 24 per cent.
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