This move is likely to benefit private sector Reliance Petroleum--which went on stream last week--Essar Oil and joint sector Mangalore Refinary and Petroleum.

In a letter chairmen and managing directors of commercial banks sent today, the central bank also allowed this exemption to all bonafide imports against the credit under the duty entitlement pass book (DEPB) scheme in the Exim Policy 1997-2000.

Bankers said that the profitablity of the State Bank of India is likely to get hit as the income from interest rate surcharge will come down. The bank charges a rate of 30 per cent of the applicable rate of interest as the interest rate surcharge on import finance.

The central bank had already allowed exemption from the levy of interest rate surcharge for bulk imports in repect ofcrude oil,petroleum products, fertilisers edible oils and other essential commodities imported through government agencies.

The exemption was also allowed for all imports under the advance licences granted for imports of "inputs" such as raw materials, intermediaries, components by either the original holder or a trasfaree.

Insight

Move offers flexibility

With the decanalisation of crude oil imports private and joint sector refineries would prefer to import their own crude requirements. Imports of crude requirements are also slated to rise from 38 million tonnes to 52 million tonnes in current fiscal. Hence, removal of this anomaly (interest rate surcharge) would give the new players a level-playing field with PSUs. This also gives the refineries the flexibility to source crude that best suits their configuration.

Manish Saxena