Slow growth in petro product excise revenue worries finmin

Figures compiled by the ministry show revenues from petroleum products have risen by only 1.5% in the current fiscal over last year. This compared poorly with the impressive 12.8% growth of non-petroleum items in the excise basket. All manufacturing companies, based on their level of production, pay central excise.

The low growth was discussed at a high-level meeting chaired by the revenue secretary and attended by the Central Board of Excise & Customs chairman with senior petroleum ministry officials. According to the revenue department, the poor growth is due to a fall in the assessable value of petrol and diesel.

The two products between them contribute 75% of the total petroleum product revenue. The assessable value is the price, as a percentage of which the excise duty is levied.

The department has claimed that the assessable value of petrol has fallen significantly from May until the first fortnight of September, despite a rise in international crude prices. In the case of diesel, the assessable value has been lower than the previous year consistently between April 2007 and September 2007.

However, according to the petroleum ministry, the lower central excise duty collection from petrol and diesel is due to a host of factors like the reduction in the ad valorem component of duty from 8% to 6% and a lower retail price. The retail prices of petrol and diesel were clipped by Rs 4 and Rs 2 per litre, respectively, in June 2006 and again in February 2007.

It has also claimed that the substitution of some domestic consumption by imports has also hurt excise receipts. HPCL had to resort to the import of diesel, which was not being supplied by Reliance. This, too, resulted in a loss of central excise revenue.

The finance ministry is also not happy with the method for fixing under-recoveries on the sale of petroleum products by oil companies and has already suggested a revision of the methodology.