War seems to have broken out between the finance and petroleum ministries over the Ashok Lahiri group’s recommendations on recasting petroleum tariffs. Despite the petroleum ministry’s strong pitch for a specific excise duty regime for petroleum products, the Lahiri panel has recommended an uniform 8 per cent ad valorem duty.The petroleum ministry, in its recommendations to the advisory group, had demanded that at least the excise duties on petrol and diesel, given their sensitivity to fluctuations in global crude oil prices, be made specific from ad valorem. While having uniform ad valorem rates would be ideal, the ministry has said to deal with volatility, the government must have the flexibility to modulate customs and excise duties. According to government officials, Petroleum Minister Mani Shankar Aiyar was likely to take up his ministry’s concerns and its reservations on the Lahiri group’s report with the Prime Minister.While recommending a nil excise duty on naphtha for fertiliser sector, the Lahiri panel has decided to keep the excise duty on subsidised products at the same 8 per cent as for petrol and diesel. This too has been opposed by the petroleum ministry on grounds that excise duty on subsidised products was anomalous. It has recommended nil excise duty on these products.The other recommendations include equating the customs duty on crude oil to that on kerosene and LPG at 5 per cent. But, the petroleum ministry feels this would place the burden solely on oil PSUs.
