Prasanna Upadhyay

Mumbai, June 3: The government will have to rationalise duty structure, state taxes and institutionalise price stabilisation mechanism to ensure a competitive market in the oil sector during dismantling of the Administrative Price Mechanism (APM).

The five-member committee headed by Mr Naresh Narad, has recommended immediate implementation of these measures to ensure a level playing field in the oil sector. The committee has said that the government should clear all outstandings including pending claims of oil companies from the oil pool account.

The report added that the government should rationalise state taxes levied on refineries and inter-company sale transactions like turnover tax, purchase tax and entry tax on crude oil. It has suggested that this can be achieved either by substitution of these by VAT, which is scheduled to be implemented from April 2002, or by effecting changes in movement plans from refineries in a manner that products from surplus states move on consignment basis, which would necessitate revamping of facilities and hence, time of about a year. In the absence of such a move, the domestic refineries will come to a halt on account of their non-competitiveness vis-a-vis imported petro-products.