Oil ministry seeks cut in cooking fuel levies

The petroleum ministry is pressing the finance ministry to reduce duties on domestic liquid petroleum gas and kerosene sold through the public distribution system.

Calculating the costs
Delhi	Kerosene (Rs\litre)	LPG (Rs\cylinder)
Basic selling price  without duties & taxes	6.42	171.44
Excise Duty	1.11	27.34
Customs Duty	1.16	26.13
Total Duties	2.27	53.47
State taxes	0.32	16.69
Total taxes (Central + State)	2.59	70.16
Retail Selling Price	9.01	241.6
Central + State taxes as percentage of basic price	40%	41%
Mumbai	Kerosene (Rs\litre)	LPG (Rs\cylinder)
Basic selling price without duties & taxes	6.35	169.78
Excise Duty	1.11	27.76
Customs Duty	1.17	26.36
Total Duties	2.28	54.12
State taxes	0.63	27.1
Total taxes (Central + State)	2.91	81.22
Retail Selling Price	9.26	251
Central + State taxes as percentage of basic price	46%	48%

Central and state duties and taxes account for more than 40 per cent of the basic price of the two cooking fuels. If these are rationalised, the under-recoveries on the sale of subsidised domestic LPG and PDS kerosene, estimated at Rs 8,200 crore (Rs 82 billion) in this financial year, could fall drastically. This will obviate the need for the sharing of the under-recoveries among oil companies.

In Delhi, Central and state duties and taxes account for 40 per cent of the basic price of PDS kerosene and 41 per cent of domestic LPG. In Mumbai, the corresponding figures are 46 per cent and 48 per cent, respectively.

In Delhi, the basic selling price (without duties and taxes) of PDS kerosene is a mere Rs 6.42 a litre. The excise duty on it is Rs 1.11 and Customs duty is Rs 1.16. State taxes account for another Rs 0.32. This means that total taxes and duties on a litre of PDS kerosene work out to Rs 2.59, which is 40 per cent of the basic price.

Similarly, the basic selling price of domestic LPG in Delhi is Rs 171.44 a cylinder. It attracts an excise duty of Rs 27.34 and a Customs duty of Rs 26.13 a cylinder. Once, state taxes of Rs 16.69 a cylinder are added, the total duties and taxes balloon to Rs 70.16 a cylinder, which is 41 per cent of the basic price.

At a recent meeting with the finance ministry, the petroleum ministry also pointed out that in the Budget for 2002-03 a provision of Rs 4,495.80 crore (Rs 44.96 billion) was made for subsidies on domestic LPG and PDS kerosene. However, the actual subsidy outgo worked out to Rs 6,709.12 crore (Rs 67.09 billion). Thus, there was a shortfall of Rs 2,213.32 crore (Rs 22.13 billion).

For 2003-04, a budgetary provision of Rs 6,300 crore (Rs 63 billion) has been made to subsidise the two cooking fuels. The petroleum ministry said that after adjusting for the shortfall of 2002-03, the net provision for the current fiscal worked out to Rs 4,086.68 crore (Rs 40.87 billion), as against the subsidy estimate of Rs 4,718.49 crore (Rs 47.18 billion).

This shortfall should be made good by the finance ministry in its revised estimates for the current fiscal, the petroleum ministry said.