New Delhi:A cess or surcharge on income tax and corporate tax may be levied to bail out oil firms reeling under high global oil prices as Petroleum Ministry’s proposal to raise petrol price by Rs10 a litre, diesel by Rs5 per litre and that of LPG by Rs50 per cylinder finds few takers.
The new proposal follows Finance Minister P. Chidambaram’s reluctance to cut duties on crude oil and petroleum products unless alternate source of revenues are identified.
Petroleum Minister Murli Deora met Chidambaram Tuesday but failed to convince him of the urgency to cut import and excise duties to avoid the Rs2,00,000 crore revenue loss expected on petrol, diesel, domestic LPG and kerosene this fiscal.
Bharat Petroleum Corp., Ltd and Hindustan Petroleum Corp., Ltd have cash to buy crude oil only till July while Indian Oil can finance imports till September. The three firms face huge liquidity crisis as they are unable to realise full value of products sold.
“We don’t want to see scarcity of petroleum products particularly kerosene and LPG,” Deora told reporters after the meeting. “Oil companies are in a precarious state and we need urgently find solutions.”
Deora said some proposals were discussed but “nothing has been agreed”.
Sources said a cess or surcharge like the one levied after the Kargil war, may be imposed on income and corporate tax to make up for the cut in customs duty on crude oil to zero from 5% and an excise duty cut on petrol and diesel.
The Petroleum Ministry is proposing to raise petrol price by Rs10 a litre, diesel by Rs5 per litre and that of LPG by Rs50 per cylinder to cut the Rs580 crore per day loss made by the three oil firms by one-third.
A Re1 a litre hike in petrol price would give oil firms Rs90 crore a month more revenue while the same quantum in diesel prices would result in Rs 360 crore revenue a month. A Rs 10 per cylinder hike in LPG prices would fetch oil firms Rs58 crore per month.
A Re one per litre cut in excise duty on petrol would result in government foregoing Rs1,380 crore revenue annually and the same on diesel would result in Rs 5,270 crore revenue foregone per year.
Crude oil currently attracts an import duty of 5% and if this is eliminated it will help lower the Rs2,72,699 crore oil import bill of 2007-08. Customs duty is levied on petrol and diesel at the rate of 7.5 per cent and its reduction would help oil companies cover some of their losses.
Petrol currently attracts Rs 14.35 a litre excise duty and diesel Rs4.60 per litre rate.
Indian Oil Corp., BPCL and HPCL, at present, are losing Rs16.34 a litre on petrol, Rs23.49 per litre on diesel, Rs 305.90 per LPG cylinder and Rs 28.72 per litre on kerosene.
The three firms are faced with a huge liquidity crunch and are borrowing Rs 3,500 crore a month to meet day-to-day expenditure. With borrowings touching Rs65,000 crore, the companies are now talking to banks to raise borrowing limit, the official added.