Will Sinha's budget slash import duties on crude

Vol 5, PW 26 (27 Feb 02) People & Policy

ITS BUDGET TIME again, and on 28th February all eyes will be on finance minister Yashwant Sinha as he announces the budget for 2002-03 to parliament.

As the deadline approaches, finance ministry mandarins are busy juggling 'Wish Lists' from ministries, trade and industry associations with their own need to collect more revenue. What does the oil ministry want from this year's budget Last month additional secretary Naresh Narad sent his 'Wish List' to Subbaram Narayan, secretary in the finance ministry.

Top of the list is a new custom tariff structure for crude oil and petro products. See below: Items Present rates Rates approved in 1997 by cabinet for 2001-02 Rates proposed for 2002-03 Crude petroleum 10% 0-5% 5% Petrol 20% 15% 15% Kerosene (for public distribution system) 5% 0% 10% Kerosene (other than above) 35% 0% 15% Aviation fuel 20% 15% 15% Diesel 20% 15% 15% LPG (home use) 10% 10% 10% LPG (non home use) 10% 10% 15% Naphtha (for fertiliser) 0% 5% 10% Naphtha (for power) 15% 5% 10% Naphtha (for others) 15% 5% 15% LNG 0% 0% 0% Other products 20% 15% 15% "In no case should product tariffs be kept below crude tariff rate as it leads to negative duty protection and vitiates the domestic refineries' production portfolio," we learn.

Officials also make a forceful case against the present 'Ad Valorem' excise duty rates on petroleum products with specific duties. "As India has a two or three-tier duty structure, 'Ad Valorem' rates have a cascading effect and the total tax impact gets magnified at the consumer end, unlike in the case of specific rates." Countries like Canada, USA, European Union, Japan, China, Pakistan and Thailand, argues the ministry, charge specific and not 'Ad Valorem' excise duties.

"We may be the only country with a three-stage 'Ad Valorem' duty structure on petroleum products. A change is a must for smooth dismantling of the APM," argues the ministry.

Shastri Bhawan also wants "concessional duty rates" on jet fuel supplied to foreign aircraft during flights from one Indian airport to another, and a total exemption from excise duty on mineral oil supplied to ships leaving for a foreign voyage.