With an aim to address the issue of fuel shortage in the country, the government Friday imposed special additional excise duty on export of petrol and diesel.
The move will not just fetch more revenue to the exchequer but also discourage companies from exporting petrol and diesel, and thereby help ease the fuel situation in the domestic market.
Private oil marketing companies were exporting petrol and diesel to foreign countries like Australia for better realisation.
“As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market. In view of this, cesses equal to Rs 6 per litre on petrol and Rs 13 per litre on diesel have been imposed on their exports. These cesses would apply to any export of diesel and petrol from the country,” the government said in a statement.
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While this move would help ease fuel shortage at pumps across the country, it would impact the bottom-line of these companies. Post the announcement, Reliance Industries Ltd fell by over 7% on the BSE to close at Rs 2408.95 Friday.
The shortage of fuel at retail outlets was because oil marketing companies were not willing to sell fuel at a loss since fuel prices have not increased despite rising crude and depreciating rupee – these two factors have led to oil marketing companies losing Rs 20-25 per litre on diesel and Rs 10-15 per litre on petrol.
Explaining the taxes, Union Finance Minister Nirmala Sitharaman said they are happy with companies making profits by exporting fuel, but these tax measures have been taken as these are “extraordinary times”.
“These are times when oil prices internationally are unbridled. They are just going on and on upward. And for any country, like India for instance, which depends largely and very much largely on imports, we also need to pay that kind of money to get the imports. But then from India, exports are happening and at a price which is abnormal, (resulting in) extraordinary profits. We don’t grudge people earning profits. But at a time when we don’t have enough supplies within India, for exploration or for refining which is happening in India,” she said.
Sitharaman said this decision has been taken at a time when there is difficulty even to get an affordable price for oil from abroad. “The wholesale customers, who were benefiting from those (private sector) pumps, were now coming over to public sector oil marketing companies’ pumps and they are welcome to come and take (them). But the supplies are also going to have to be available,” she said.
The Finance Ministry did not give a timeline for continuation of the levy and will assess the situation every 15 days to review the impact of these duty changes.
Starting June, fuel pumps across the country have been reporting fuel shortage, leading to their closure. The situation of fuel shortage at pumps peaked during the middle of June, resulting in the government issuing a statement on the matter. The statement assured of enough fuel available in the country and asked oil marketing companies to ensure their fuel pumps remain open.
Among other announcements, the government also imposed a cess of Rs 23,250 per tonne (by way of special additional excise duty) or windfall tax on domestic crude being sold to domestic refineries at international parity prices.
Global crude prices have risen and domestic crude producers are making windfall gains. After the announcement, ONGC Ltd fell 13.40% on the BSE. While Oil India slid more than 15 per cent, Mangalore Refinery and Petrochemical slumped 10 per cent. Chennai Petroleum Corporation fell more than 5 per cent and Hindustan Oil Exploration Company stock declined over 3 per cent.
Also, export policy conditions have been imposed by the DGFT that the exporters would be required to declare at the time of exports that 50% of the quantity mentioned in the shipping bill has been/will be supplied in the domestic market during the current fiscal.
A cess of Rs 6 per litre has also been imposed on export of Aviation Turbine Fuel (ATF).
These measures, however, will not lead to any increase in price in the domestic market, the government said.
Meanwhile, the government has also hiked import duty on gold to 15 per cent from 10.75 per cent to curb import of gold amid concerns over high gold imports putting pressure on the current account deficit.
“India does not produce much gold at all. In fact, I can say nil. So you are importing, paying foreign exchange. You are importing a not-so-essential commodity but, of course, gold is inelastic in its demand. So you would want to see whether you can at least try to discourage (the gold imports),” Sitharaman said.
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