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Excise duty on diesel to be reduced by Re 1 per litre

The Petroleum Ministry wants the excise duty on diesel reduced in the forthcoming budget, reports Deepak Joshi.
None | By Deepak Joshi, New Delhi
PUBLISHED ON JAN 23, 2007 08:29 PM IST

The Petroleum Ministry wants the excise duty on diesel reduced by Re 1 per litre in the forthcoming budget. It tops the wishlist submitted by Petroleum Minister Murli Deora to Finance Minister P Chidambaram on Tuesday.

Emerging from their hour-long meeting Deora said, "Yes, we have asked for a reduction in the excise duty on diesel. Despite the fall in international crude prices, oil companies continue to lose 50 paise per litre on diesel." He noted that reducing the duty would also help contain inflation.

The present excise duty on diesel is 8.16 per cent of the price, plus Rs 3.32 on each litre - the two together translating into a total levy of Rs 4.98 per litre. Last year the duty was Rs 3.41 per litre. Revenues from excise duty on diesel has increased to Rs 24,214 crore in 2005-06 from Rs 16,338 crore a year ago, officials said.

Deora also sought infrastructure status for the exploration and production (E&P) business, which will exempt it from paying income tax for 10 years. He wanted import of liquefied natural gas, as well as cross country pipelines for crude, gas and petroleum products.

The petroleum ministry also wants the service tax on survey and exploration of mineral services scrapped as it "inadvertently levies tax on core function of E&P activities." Besides, companies under the New Exploration Licensing Policy are entitled to set off taxes as part of "cost petroleum", correspondingly reducing government share.

In detailed discussions with the finance minister, Deora reportedly suggested that infrastructure status similar to the power and telecom sectors should be given to the oil sector to attract investments. The pipeline sector is expected to witness $ 15 billion (Rs 67,500 crore) worth of investments in next few years.

"Domestic E&P investments are the need of the hour considering or growing dependence on oil imports. Similarly, pipeline projects once implemented, provide cost efficient and environment friendly transportation of hydrocarbons, which essentially increase availability of roads, highways and railways" for other purposes, the petroleum ministry had said in a note to the finance ministry earlier.

Outlining its reasons for seeking infrastructure status, it pointed out that facilities put up in the oil sector are no less than other infrastructure sector projects as they serve the energy needs of the nation.

Apart from this, the finance ministry has been urged to give ‘declared goods’ status to natural gas/ liquefied natural gas (LNG) under the Central Sales Tax Act. Similar status to other primary energy sources like coal and crude oil enable them to face sales tax of not more than 4 per cent.

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