According to the formulae prepared by the petroleum ministry, the HSD prices could be brought down by reducing the customs duties on crude oil and petroleum products. This could be done without jeopardising the revenue collections earmarked on this account, the petroleum ministry said The ministry has written to the Union Cabinet that since customs duties on oil and petroleum products are collected at ad valorem basis, increase in the international prices of oil and oil products has a multiplier impact on the retail selling prices.

In the Budget estimates of 1999-2000, a total of Rs 22,296 crore of revenue was expected from the petroleum sector. Consequent upon the increase in the increase in international prices of oil and oil products, revenue receipts of the central government are now likely to go up to Rs 29,837 crore, if thead valorem rates of duties are kept at the existing level.

The ministry has further informed the Cabinet that as per the recommendations of the expert technical group (ETG) on the phased dismantling of the administered price mechanism (APM), duties on crude oil and HSD are to be brought down to 15 per cent and 25 per cent respectively during the second year of the phased programme, during the current year.

However, presently the same are at 20 per cent and 30 per cent, respectively.The petroleum ministry has given two options to the Cabinet on possible price reduction in HSD. According to option one, if duties on crude oil and other petroleum products are brought down from the present level of 20 per cent and 30 per cent, respectively, to 15 per cent and 25 per cent, the estimated receipts from the petroleum sector during 1999-2000 will be around Rs 28,570 crore, 28 per cent higher than the budget estimates.

According to option two, if duties on crude oil and products are brought down from the presentlevel of 20 per cent and 30 per cent to 10 per cent and 20 per cent respectively, the estimated receipts from the petroleum sector during the current fiscal will be around Rs 27,304 crore, 22 per cent higher than the budget estimates.