The Hindu Business Line : Cess on crude should be used to stabilise oil prices: Panel

THE Standing Committee on petroleum and natural gas has recommended the creation of a price stabilisation fund using the money collected from cess on crude oil.

The committee feels the fund will be able to absorb fluctuation in the international price of crude oil. The annual average collection of cess is estimated to be Rs 5,000 crore.

"There is no justification in levying the cess if the amount generated is not utilised for the development of the oil sector," the committee observed in its recommendation placed before Parliament last week. The standing committee is chaired by Mr N. Janardhana Reddy.

According to Mr Reddy, the committee has "regretted to note" that though the Government has collected close to Rs 1,00,000 crore (inclusive of interest) from the cess ever since it was introduced 12 years ago, "no amount has been allocated to the Oil Industry Development Board (OIDB) so far."

Though no corpus size for the proposed price stabilisation fund was indicated, the committee said the "required amounts may be credited or debited to the `price stabilisation fund' depending upon the fall or rise in international prices. The fund may also be used as a cushion in case of reduction in the import or excise duty on LPG, kerosene, petrol and diesel. The fund can also be used to provide subsidy to kerosene and LPG."

Extending its arguments in favour of a re-look at the whole issue of collecting cess of crude oil, the committee recommended that the customs duty levied on kerosene and LPG should be brought down to nil. The Government would not lose any money on kerosene, as it is not imported. The loss incurred on LPG may be made up by utilising the price stabilization fund.

To reduce the impact of rising crude prices in the world market on the domestic consumers, the committee suggested that the existing ad valorem duty structure should be replaced by fixed or specific duties. Similarly, "efforts should be made to convince the State Governments to levy specific sales tax on petroleum products." Emphasising the need for a Petroleum Regulatory Board, the committee said that, "the Bill should have been introduced in the current session of Parliament." According to the Petroleum and Natural Gas Ministry, the Bill would be ready for introduction in the Lok Sabha in the winter session.

Regarding expansion of the CNG system, primarily to reduce vehicular pollution, the committee expressed dissatisfaction at the slow rate of implementation of the scheme especially in the Eastern region. "There is a complete lack of planning in extending the CNG system to the cities in the Eastern region of the country such as Kolkata, Bhubneswar, Patna and Ranchi," it felt.