Petroleum products may invite specific excise duty post-APM

New Delhi, January 4: | Updated: Jan 5 2002, 05:30am hrs
The government is planning a switch over from the existing ad-valorem excise duty structure for petroleum products to a specific excise duty regime once the administered pricing mechanism is done away with from April 1. Under the new mechanism, it is proposed that for the next fiscal, the government would levy a specific excise duty/CVD of 32 per cent on petrol and ATF, and a 16 per cent on all other oil products.

However, for subsidised products like PDS kerosene, domestic LPG and naphtha for fertilizer and power plants, it is proposed that the excise duty rates either be zero or at best equivalent to 8 per cent. While doing this, the existing prices may be taken as base for converting the ad-valorem excise duty rate to specific rates, a senior government official said.

Alongside, it has also been decided that there should be a graded specific excise duty structure for diesel, which constitutes almost 40 per cent of the total consumption of oil products.

Sources also said this new duty structure had been agreed in principle both by the petroleum and finance ministries, adding the petroleum ministry would soon seek approval of the Cabinet for this.

According to sources, the graded specific excise duty rates on diesel is proposed in order to check the variations in retail consumer prices in those states which are far off from the coastal areas. As per the suggested mechanism, specific excise duty leviable at bonded diesel depots would be reduced for the depots located away from coastal areas in proportion to the distance traveled from the pre-designated ports. The graded specific excise duty would be decided by the finance ministry at the time of finalising the next Budget, sources said.

On the post-APM customs duty rates, sources said the government planned to fix a 5 per cent customs duty on crude and 15 per cent on refined products. Officials also said while subsidised products like PDS kerosene, domestic LPG and naphtha for fertiliser and power plants would again have a lower customs duty, but in no case that duty would be lower than the duty on crude.

Justifying the proposed switch-over to specific excise duty rates, sources said ad-valorem excise duty structure accentuated the volatility in the prices of petroleum products, besides creating anomalies in the applicability of duty on domestic products vis-a-vis imported products (CVD) in relation to freight component included in prices. It is due to these reasons that the Centre has decided to convert the ad-valorem excise duty rates to specific rates, for which the existing prices will be taken as base, sources said.