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Richa Mishra

New Delhi, Aug. 24 The public sector oil marketing companies – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – may have to bear a higher price for petrol and diesel purchased from a export-oriented unit (EOU) refinery vis-À-vis imported products.

The companies would end up paying about Rs 3 a litre more on purchase of diesel and Rs 10 a litre higher on petrol compared to the rates they pay for imports, industry officials said.

To make the sourcing of the products from the export-oriented unit like Reliance Industries Ltd’s (RIL) Jamnagar refinery more compatible, the industry has been seeking changes in tax norms.

Officials told Business Line, “An EOU refinery will face a double tax component on the specific excise duty, which in all likelihood it would like to pass on to the buyer of the product. Thus, if the price of imported diesel is at Rs 45 a litre, the product sourced from an EOU refinery will cost Rs 48 a litre. This would lead to mounting pressure on the already cash-strained OMCs.”

Currently, there is a 2.5 per cent customs duty on the two products, plus a specific excise duty of Rs 13.75 a litre on petrol and Rs 3.71 a litre on diesel. In addition to these duties, if the EOU refinery has to feed the domestic market (Domestic Tariff Area) then a tariff of Rs 3 a litre on diesel and Rs 10 a litre on petrol would be levied. The company will also have to pay income-tax on its profits when it sells fuel in the domestic tariff area.

The OMCs have been asked by the Petroleum Ministry to come back with a concrete proposal pertaining to differential pricing of diesel and other issues concerning diesel supplies. It is also being considered if domestic sales by Reliance in the DTA can be given a ‘deemed export status’ and continue to get income tax waiver, which the company gets for selling LPG to the PSUs.

More Stories on : Petroleum | Petroleum | Taxation

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