With state-run oil marketing companies incurring huge under-recoveries,the petroleum ministry has demanded 100 per cent depreciation on LPG cylinders and regulators in the impending Union Budget 2012-13.
In its wish list,the ministry said OMCs are incurring huge expenditure on procurement of new cylinders to meet supply of LPG for new customers,whose numbers have swelled by lakhs during the past three years.
The ministry said that during 2008-09,53.20 lakh new customers enrolled and another 86.20 lakh were registered in 2009-10,and 104.2 lakh in 2010-11. During April-September,2011 PSU oil firms have provided 57.8 lakh new LPG connections. As on September 9,2011,the total LPG customer base is approximately 66.73 per cent of countrys population as per census 2001.
Since these equipment are used for bottling and distribution of LPG involving extensive wear and tear,they should be allowed 100 per cent depreciation in the year of procurement as was allowed in 2002-03,under Section 32 of the Income Tax Act the petroleum ministry told the finance ministry.
In the 2003 Budget,depreciation rate of LPG cylinders and regulators was reduced to 80 per cent and further to 60 per cent in the 2005 Budget. But,in view of the continued situation of high and volatile oil prices in the international market,the government continues to modulate the retail price of diesel and PDS kerosene and domestic LPG,below the required market price.
In view of the alarming under-recoveries,a Empowered Group of Ministers in its meeting held on June 24,2011 enhanced domestic LPG prices by Rs 50 a cylinder. The under-recovery per unit of a LPG cylinder works out to Rs 267. The aggregate under-recovery suffered by OMCs for such cylinders have been 17,600 crore for 2008-09,Rs 14,257 crore 2009-10,Rs 21,772 crore for 2010-11 and Rs 7,465 crore (April-Sept,2011),according to sources. As of August1,2011 there are 4,894 LPG markets and 10,183 regular LPG distributors.