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Premium fuels may attract higher duty

autos Updated: Nov 29, 2007 00:26 IST
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Automobile owners could end up paying more to fill their car tanks with branded fuels. The Central Board of Excise and Customs (CBEC) has issued a draft circular asking oil companies to explain why the fuels branded differently as Speed, Xtra Premium, Power and Turbojet should be exempt from 5 per cent excise duty, a fiscal sop given only to ethanol blended fuel.



Petroleum marketing companies mix/blend motor spirit (commonly referred to as petrol) and diesel with multi-functional additives (MFA) and are marketing these products under different brands.



The CBEC is of the opinion that mixing of MFAs in normal petrol and diesel imparts certain properties to the new product having a bearing on the performance of the engines. "The process of mixing of additives results in the emergence of a new product having a distinct name, character and use and should be treated as process amounting to 'manufacture'," the draft circular said.



The CBEC's opinion, if accepted and implemented, would mean that branded fuels would cost more as companies cannot claim 5 per cent excise duty exemption as done for ethanol blended petrol. Under existing norms, blending of 3 per cent ethanol with 97 per cent petrol is not defined as 'manufacture' and therefore granted duty exemption.



In July 2002, Bharat Petroleum Corporation launched for the first time in India premium grade petrol under the brand name 'Speed'. Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation Limited (HPCL) followed shortly by launching their own branded 'new generation' fuels Xtra Premium, Xtra Mile, Power and Turbojet.



Industry estimates suggest that over 10 per cent of petrol/diesel sold in the country are branded fuels. Oil marketing companies have contested the CBEC's view.