'FinMin move may sound death knell for oil refineries'
The Finance Ministry wants auto fuel to be priced at export parity by abolishing 2.5 per cent customs duty on petrol and diesel to save up to Rs 18,000 crore in annual subsidy outgo.
The Petroleum Federation of India (Petrofed), an apex body of entities in hydrocarbon sector, on January 28 wrote to Finance Minister P Chidambaram saying removing duty protection on products would render "some inland refineries sick" while private refiners like Reliance Industries and Essar Oil may resort to exporting their full production.
There is no import duty on crude oil and if the same on petrol and diesel is also abolished, there were be no duty protection left to the refineries who included the element of customs duty in pricing of the product to make up for freight, Central Sales Tax (CST) and other charges.
"While a change from trade parity pricing to export parity pricing may benefit fiscal management of the government in short term by lowering its subsidy burden but it would render a serious blow to the domestic refineries," it wrote.
It said domestic refineries were removed from the cost plus mechanism on April 1, 1998 and pay the price of feed-stock crude oil on import parity basis. Indigenous crude oil is also paid for the refineries on import parity basis.
India imports nearly 80 per cent of its crude
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