Protect Domestic Refineries: Naik

Petroleum Minister Ram Naik has sought protection of domestic refineries by pitching for a minimum 10 per cent difference between import duties on crude and petroleum products.

In his meeting with Finance Minister Jaswant Singh today, Naik also asked for a reduction in the Customs duty on crude and petroleum products, a specific excise duty on petroleum products, and duty waiver on capital goods for refinery expansions and upgradation of projects.

The Kelkar report on indirect taxes had recommended the Customs duty on crude and petroleum products should be brought down to 8 per cent and 15 per cent, respectively, in the first phase.

At present, import duty on crude is 10 per cent, while that on products like petrol and diesel is 20 per cent.

Naik was of the view that a difference of at least 10 per cent between duties on crude and oil products was needed to protect the domestic refineries, and the Kelkar committee recommendations would reduce their effective rate of protection.

Naik's wishlist included infrastructure status for LNG terminals and exploration and production activities, Customs duty waiver on LNG imports, and a uniform sales tax on LNG.

During the pre-Budget discussions, the petroleum minister is also learnt to have sought excise duty cut on petroleum products to check the adverse impact of excessive volatility in international crude prices.

Demanding at least a 2 per cent excise duty cut on petrol and diesel, Naik said the duty on LPG and kerosene sold through the public distribution system (PDS) should be slashed to zero.

While making a case for a revenue-neutral duty cut, Naik said the spike in crude prices had already seen oil companies raising petrol and diesel prices twice this month, and if the excise duty was not reduced immediately, more hikes were inevitable.

The petroleum minister said Customs revenue from oil imports had gone up substantially following the hike in crude prices and a duty cut would not impact its revenue targets.

He is learnt to have sought a lower cess on crude, which was doubled to Rs 1,800 per tonne for public sector oil firms in Budget 2002-03, and indexing it to crude prices.

Naik is also learnt to have pointed out while the Budget had promised a 75 paise per litre excise duty concession on ethanol-blended petrol, the finance ministry had extended only 30 paise per litre duty relief.