The Budget may have grim news for the common man as Finance Minister P Chidambaram plans to change the tax structure on crude oil and petroleum products, a step that would raise the consumer prices of petrol and diesel. Despite objection by the Petroleum Ministry, North Block has indicated that it plans to ‘‘rationalise’’ petro-taxes to include suggestions by Chief Economic Advisor Ashok Lahiri & Co to insulate India from spiraling global prices. The change, said the oil ministry at the last pre-Budget meeting, would increase petrol price by Rs 1.97 a litre and diesel by 6 paise per litre in Delhi. ‘‘If the oil marketing companies were to absorb this impact, their additional burden would be Rs 81 crore a fortnight or about Rs 1,950 crore on annual terms,’’ it said. The Lahiri-headed Advisory Group on Restructuring Tariffs on Crude and Petroleum Products has suggested that customs duty be lowered and excise be hiked on crude and certain products to insulate consumers from fluctuating global prices while maintaining revenue buoyancy. It has recommended that customs on crude be halved to 5 per cent while those on petro-products be cut to a uniform 10 per cent from current variables of 15-20 per cent. In the same breath, it wants an increase in excise duties on products to factor in the indirect loss in government’s revenue because of customs duty cut. ‘‘A reduction in basic customs duty on products reduces the assessable value for excise,’’ it reasoned. Its recipe is that while the current concessional excise duty of 8 per cent on LPG and aviation fuel be continued, excise on kerosene for public distribution be brought down to 4 per cent from 12 per cent. For petrol, it has suggested conversion of a large part of the ad valorem excise into specific rates to ameliorate the consumer burden of an exogenous price shock. That would be through a change from 23 per cent and Rs 7.5 per litre to 8 per cent and Rs 12 per litre. For diesel, it wants the specific component to be increased by Re 1 a litre to Rs 2.50 per litre while maintaining the ad valorem rate at 8 per cent. This comprehensive exercise is expected to cut Chidambaram’s Budget revenue by Rs 121 crore while reducing the under-recovery of oil marketing companies on LPG and kerosene by Rs 3,968 crores, it says.
