Riding on an ad valorem taxation structure, state governments have for the first time collected more revenue on petroleum products than the Centre. The states together collected Rs 112,889 crore petroleum revenue in FY12 (up 27 per cent from FY11) while the Centre collected Rs 83,723 crore, down 19 per cent from FY11 due to a reduction in diesel excise and elimination of customs duty on crude oil in June last year, according to data with the Petroleum Products Planning and Analysis Cell, a wing of the petroleum ministry.
The central government’s customs duty on petroleum products declined 59 per cent in FY12 to Rs 10,013 crore. This was, as mentioned, mainly due to elimination of customs duty on crude oil and reduction in customs duty on petroleum products by five per cent in June last year. Similarly, the collection of excise duty on petroleum products declined from Rs 68,040 crore in FY11 to Rs 61,954 crore in FY12, mainly due to reduction in diesel excise duty in June last year, said a PPAC official.
State governments levy sales tax or value added tax on petrol, from 15 per cent in Puducherry to 33 per cent in Andhra Pradesh, making it a major source of income. By contrast, the excise duty imposed by the Union government is specific at Rs 14.35 a litre, exclusive of a three per cent cess. More, in June last year, the Centre removed the five per cent customs duty on crude oil, brought down the import duty on petrol and diesel from 7.5 per cent to 2.5 per cent and reduced the excise duty on diesel from Rs 4.60 to Rs 2.60 per litre. In the case of ATF, too, states charge ad valorem tax that comes to an average 24 per cent. A sharp increase in prices of both petrol and aviation turbine fuel meant more revenue for states. Among the latter, the highest petroleum tax levy last year was collected by Maharashtra at Rs 14,815 crore, followed by Gujarat (Rs 10,412 crore) and Andhra Pradesh (Rs 9,538 crore).
The decline in the central government's revenues from petroleum products came at a time when its subsidy outgo to its three oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — stood at a record Rs 83,500 crore or 60.27 per cent of the gross under-recovery of Rs 138,541 crore during 2011-12. The three companies sell diesel, kerosene and domestic cooking gas at a government regulated price and a loss, compensated through a cash subsidy from the government and discounts on crude oil by Oil and Natural Gas Corporation and Oil India.
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These would come up in Kerala, Karnataka, Tamil Nadu and Maharashtra