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 liquefied petroleum gas (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 on Tuesday, but failed to convince him of the urgency to cut import and excise duties to avoid the Rs2 trillion revenue loss expected on petrol, diesel, domestic LPG and kerosene this fiscal.
State-run oil marketing firms Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) have cash to buy crude oil only until July, while Indian Oil Corp. (IOC) can finance imports until September.
The three firms face huge liquidity crisis as they are unable to realize full value of products sold. They are borrowing Rs3,500 crore a month to meet day-to-day expenses.
“We don’t want to see scarcity of petroleum products particularly kerosene and LPG,” Deora said after the meeting. “Oil companies are in a precarious state and we need to urgently find solutions.” He said some proposals were discussed but “nothing has been agreed.”
People close to the development 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.
Petroleum ministry is proposing to raise petrol, diesel and LPG prices to cut by one-third the Rs580 crore per day loss incurred by the three oil firms.