Financial Daily from THE HINDU group of publications
Thursday, Aug 19, 2004
Financial Daily from THE HINDU group of publications Thursday, Aug 19, 2004 |
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Excise and Customs Industry & Economy - Petroleum What the reductions mean Our Bureau
New Delhi , Aug. 18 TODAY'S succour of duty reductions for the consumer and petroleum industry could not have come at a better time. Crude, the raw material for the petroleum industry, on Wednesday touched an all-time record high of $47 per barrel. A cut in customs duty on petrol, diesel, LPG and kerosene has blunted the dream run for refiners who were earning margins ranging from $5 per barrel to $12 per barrel, depending on their location, quality of crude, etc. The high margins are earned not on account of efficiency gains but because they are derived from the differential in customs duty on crude and products. The profitability of the domestic refiners will dip by Rs 3,000 crore for the rest of the fiscal due to the duty reductions. Pure refiners like Reliance Industries Ltd, which operates a 31-million tonne refinery in Jamnagar will have reduced profitability to the extent of around Rs 275 crore for the rest of the fiscal. The bruised marketing business of the public sector oil companies that have had to contend with high input costs - soaring refinery prices - and controlled selling prices will find some respite in the lower refinery margins and some balm in the excise duty reductions effected by the Government today. Here, the Central exchequer has foregone excise revenues of around Rs 2,000 crore for the rest of the fiscal to improve the viability of the marketing companies as well as mitigate the burden on the consumers. Hence, refiners having a marketing arm like Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd will fare better at the end of the duty alterations. However, with the unabated rise in global crude prices, today's solution may be yet another interim measure.
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