Thursday, September 28, 2000,
Chandigarh, India


M A I N   N E W S

Inter-state ban on sale of petro products goes

NEW DELHI, Sept 27 (PTI) — In a bid to soften the blow of impending hike in prices of petroleum products by the month end, Petroleum Minister Ram Naik today announced the lifting of ban on national oil companies for inter-state sale of products, including diesel, which would help bulk consumers avail the benefit of lower taxes.

“It will certainly reduce the impending impact of rise in prices of petroleum products,” he said while announcing the recommencement of inter-state movement of products, which was banned in June in the wake of the sales tax scam in Gujarat.

Against the high sales tax rates by individual states, going up to 34 per cent in case of Mumbai, the product sold inter-state would attract a uniform tax of 4 per cent.

Following the decision, furnace oil, low sulphur heavy stock (LSHS), heavy petroleum stock (HPS), residual fuel oil (RFO), light diesel oil (LDO) and bitumen could now be sold to the customers on an inter-state basis but the sale of high speed diesel (HSD) would be restricted to bulk customers.

“We had representations from industrial users who were economically hurt by the decision to ban inter-state movement. We have now reverted the earlier decision to provide relief to the industry,” Mr Naik said, adding that the decision would help reduce the cost of operation of the industry.

As a result of the high sales tax rates ranging from 5 to 34 per cent in different states, national oil companies had lost significantly their markets for industrial inputs like naphtha and furnace oil as private refiners and importers were kept out of the purview of the ban.

The coordination committee of three national oil companies — Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) — had petitioned the government earlier this month that they had lost business worth over Rs 500 crore on furnace oil alone in the first three months of the ban.

They said that they were also forced to cut Naphtha price by about Rs 1000 per tonne in a bid to remain in the market and avert choking of refineries by surplus products.

Maharashtra had increased the ST on diesel by two per cent to 30 per cent while pegging the tax at 34 per cent in Mumbai, Thane and Navi Mumbai on August 31. Madhya Pradesh with ST at 25 per cent and Uttar Pradesh at 20 per cent on diesel are the other states on the higher side.

The government has also permitted oil companies to consider increasing the prices of naphtha for re-processors so that its use as adulterant was made unviable. “This initiative would minimise the adulteration of transporation fuels like petrol and diesel with naphtha,” Mr Naik said.

The oil companies have been directed to ensure inter-state sale to the customers who physically exist and to verify the certificates granted by the sales tax authorities once a year.

“We have got all the major industrial customers physically inspected, thereby reducing the possibility of misusing products on inter-state basis,” Mr Naik said.

Industrial customers, availing the four per cent sales tax, would have to furnish the details of the purpose it will be used for and reduction in capacity or temporary closure whenever it takes place.

Meanwhile, Mr Naik today said there were no differences between him and finance minister Yashwant Sinha over the proposed duty cuts for crude and petroleum products being planned as part of efforts to tackle an estimated Rs 23,600 crore oil pool deficit.

Maintaining that the government would announce a hike in prices by the end of the month after the Finance ministry decided on the quantum of cuts in customs and excise duties, Mr Naik told reporters after a cabinet meeting that “there is no difference with anybody.”

“The Finance minister has already agreed to a three-pronged strategy of cut in duties, issuance of oil bonds and hike in prices of petroleum products to tackle the oil pool deficit,” he said when asked about the reported differences between him and Mr Sinha on the issue of duty cuts and oil bonds.

Following the meetings of cabinet and national democratic alliance on Saturday, Mr Naik had announced that one-third of the pool deficit, estimated for the current fiscal in view of the surge in global oil prices, would be met by increasing the domestic prices.

One-third of the deficit would be managed by cut in duties while the remaining would be accounted for by refund of oil pool deposits of Rs 4,429 crore with the government and issuance of oil bonds.

There had been media reports after the announcement that delay in hiking prices of products was on account of resistance from the Finance ministry to both the duty cuts and issuance of oil bonds.

“the quantum of hike has to be decided and it is being decided,” Mr Naik said.

However, he parried a question as to whether he would take into consideration the latest decline in international crude oil prices too.

Mr Naik had said that the finance minister had agreed to cut duties to pass on some of the surplus accruals.

The Petroleum ministry was expected to pass on to consumers only one-third of the Rs 23,600 crore oil pool deficit by raising prices of petrol, kerosene, LPG, diesel and ATF, while making up for the rest by cutting duties and floating oil bonds.

The Finance ministry is expected to mop up about Rs 41,000 crore from excise and customs as against the budgetary target of Rs 27,000 crore during 2000-01 on account of spurt in global crude prices.

The formula for mitigating the Rs 23,600 crore pool deficit during the current fiscal was arrived at on the presumption that crude prices would average $ 30 a barrel.

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