Centre levies cess on crude, export duties on petrol, diesel

In what  could come as a respite for motorists who have to pay for high fuel rates, as Centre has come down heavily on domestic crude producers   who are believed to be making   windfall gains by selling  it to domestic refiners at international parity prices in addition to exporting it. 

A cess of Rs 23250 per tonne has been imposed on crude while the  imported crude has been exempted from it.  The development will have no adverse impact on domestic fuel prices, the ministry of petroleum said in a statement on  Friday. The ministry also clarified that the small producers, whose annual production of crude in the preceding financial year is less than 2 million barrels will be exempt from this cess.

Also, to incentivise an additional production over preceding year, no cess will be imposed on such quantity of crude that is produced in excess of last year production by a crude producer.

On the other hand, special  additional excise duty/cesses has been imposed on exports of petrol and diesel at the rate  of  Rs 6 per litre on petrol and Rs 13 per litre on diesel. “While crude prices have increased sharply in recent months, the prices of diesel  and Petrol have shown a sharper increase. The refiners export these products at globally prevailing prices, which are very high. As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market” the statement added. 

Further, the export policy condition has been imposed by the DGFT  requiring exporters  to declare  that 50 percent  of the quantity mentioned in the shipping bill has been/will be supplied in the domestic market during the current fiscal.

The development comes weeks  after the Centre in mid-June  announced  the relaxing of criteria for grant of authorisation for marketing of transportation fuel to facilitate greater participation from the private sector oil companies. The extension of the universal service obligation (USO) is aimed at maintaining petrol and diesel supplies during the specified working hours ,and in specified quality and quantity. This has been done to ensure adequate fuel in remote areas by the private sector, as well as to ensure the setting up of fuel outlets. The relaxation obliges private players to make  available minimum facilities as specified by the Government in addition to maintaining minimum inventory, providing services to any person on demand within a reasonable period of time and on non-discriminatory basis and ensuring fuel availability to customers at reasonable prices. Private oil companies have in recent weeks reduced supplies on the grounds that retailing has become unviable as PSU oil companies tend to indulge in price freezing (on account of elections and other reasons), thereby selling at rates below the cost.