Petro products help lift dwindling tax collections

Increase in first half of FY14 comes despite a fall in average crude prices; weak rupee helps

A substantial increase in revenue collections from petroleum products in the first six months of this financial year, thanks to exchange rate gains because of a weak rupee, has helped the government offset the fall in tax mop-up from other products to some extent. The increase has come despite a fall in average crude oil prices during the period.

“Rupee depreciation has led to increase in collections from petroleum products, but other categories have not performed well due to an economic slowdown,” said a finance ministry official.

Petroleum duties comprised 9.6 per cent of total Customs collections, whereas its share in excise collections was much higher at 56.3 per cent during April-September. Without petroleum duties, the fall in excise collections would have been much steeper.

Central excise collections from non-petroleum products fell by 17.7 per cent during April-September to Rs 33,046 crore. However, as mop-up from petroleum products recorded a jump of 4.6 per cent to Rs 42,641 crore in these six months, total excise collections fell by 6.5 per cent to Rs 75,687 crore.

Similarly, Customs duty collections from the petroleum sector rose by 17.4 per cent to Rs 8,129 crore up to September 2013, but since mop-up from other sectors registered an increase of only 8.2 per cent at Rs 76,514 crore, overall customs duty collections rose by nine per cent to Rs 84,643 crore.

The rupee depreciated by about 16 per cent this year from around 54 against the dollar at the beginning of April this year to 62.62 at the end of September. The depreciation last year was 3.89 per cent, from 50.88 in April to 52.86 in September.

The average crude oil price of Indian basket in April-September was $104.43, compared to $107.12 a barrel in the year-ago period. At present, excise duty on petrol and diesel is levied at Rs 9.48 a litre and Rs 3.56 a litre (including three per cent education cess), respectively. Customs duty on diesel is levied at 2.58 per cent (including three per cent education cess). There is no Customs or excise duty on kerosene and domestic liquid petroleum gas (LPG).

States also levy value added tax (VAT) on petroleum products. For example, VAT is levied at 20 per cent on petrol and at 12.5 per cent on diesel in Delhi. It is Rs 0.71 a litre on kerosene. The finance ministry has proposed to apply a uniform tax on petroleum when the goods and services tax comes into effect, but states have opposed the move as they want to retain their power to levy tax on petroleum.

The oil ministry has repeatedly asked the finance ministry to lower duties on petroleum products. In the latest communication, Petroleum Minister M Veerappa Moily has urged it to cut duties on branded petrol and diesel. At present, branded fuel is taxed at a higher rate than normal fuel.