Panel seeks duty cuts in oil products

NEW DELHI, JANUARY 28: quot;If the impact of the increase in the international prices on the domestic price of diesel is to be reduced,...

NEW DELHI, JANUARY 28: quot;If the impact of the increase in the international prices on the domestic price of diesel is to be reduced, the customs duty on diesel must be reduced to 25 per cent,quot; a panel on pricing and tariffs said in its report.

The customs duty on diesel imports is currently at 30 per cent with an additional countervailing duty of 16 per cent. India fixes refinery prices of products at levels which it would have paid for its imports, including customs duty. A duty cut would lower the price it pays to refiners, and the price it charges consumers.

quot;In addition, it is proposed to bring down the excise duty on diesel to eight per cent from 16 per cent immediately to contain further increase in the diesel prices,quot; the report said.

It also recommended lowering customs duty on crude to 10 per cent from current 20 per cent. Based on the proposed tariffs and current global prices, revenue collection would be Rs 292 billion 6.7 billion in 1999/2000 and 266 billion in 2000/01, the report said.

quot;Alternately, the cess tax of one rupee per litre imposed on diesel during 1999/2000 April-March budget can be withdrawn to contain further increases in the price of diesel,quot; it suggested.

India levied a cess, or a specific-purpose tax, on diesel to fund the development of national highway projects at a time when global prices of crude and oil products were at rock-bottom levels.

The panel has submitted its proposals to an inter-ministerial committee 8212; Hydrocarbon Vision 2025 8212; which will incorporate the recommendations of other panels in framing the blueprint for reforms of the sector.

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Sub-groups on exploration, alternate energy, deregulation and restructuring of state firms, external policy and oil security, and refining, marketing and infrastructure have submitted their proposals.

The report, which aims to transform India into a major hydrocarbon power by 2025, will need the approval of the Indian Cabinet, which includes the ministerial committee members.

ADHERE TO REFORM BLUEPRINT

The panel has suggested the government stick to the 1997 Cabinet-approved schedule to rationalise tariffs before April 2002, when India plans complete liberalisation of the oil sector.

quot;It may not be possible to go in for drastic reduction in duties in the last one or two years of the phasing8230;Customs duty on crude should be 10 per cent and on transport fuels 25 per cent.quot;

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The federal cabinet has approved lowering of customs duty on crude to 15 per cent from April 1999, and to 10 per cent from April 2000. On transport fuels, customs duty was proposed to be lowered to 25 per cent from April 1999, and to 15 per cent from April 2000. Customs duties on transport fuels are currently at 30 per cent.

The report suggested elimination of subsidy on liquefied petroleum gas LPG starting April 2002 as well as quot;time-bound programmequot; for abolishing subsidy on kerosene by 2007. The reform blueprint stipulated limiting the subsidy on kerosene to 33 per cent of its import parity price and 15 per cent for LPG from April 2002.

However, the scheduled subsidy cuts for the two products have not been implemented even after the start of reforms in 1998/99. In the long-term, customs duty on crude should be lower than on products, and their tariffs should be aligned to levels prevalent in the Asia-Pacific region, the report said.