Recommendation of the Policy Planning Cell Of the Ministry of Petroleum and Natural Gas

December 21, 2006 (Press Release) -- Views/suggestions concerning the overall tax structure regarding both direct taxes and indirect taxes/duty rates for specifications - Proposal for Budget 2007-08
This has reference to our letter of even reference dated 13/11/06 and the telephonic discussions the undersigned on the subject.
As desired, we enclose the revised calculations with the assumption that the excise duty on petrol/diesel shall also be increased to an extent so that gain on account of reduction in customs duty is neutralized.
The details of the proposed tariff structure (under 2 options) are as follows:
Customs Duty
Product Present Proposed
Option I Option II
Crude 5% 0% 2.5%
Petrol 7.5% 2.5% 5%
Diesel 7.5% 2.5% 5%
SKO Nil Nil Nil
LPG Nil Nil Nil
ATF 10% 5% 7.5%
Naphtha 5% 0% 2.5%
FO/LSHS/Bitumen/Wax 10% 5% 7.5%
Excise Duty
Product Present Proposed
Option I Option II
Naphtha 16.32% 22.08% 19.13%
FO/LSHS 16.32% 21.69% 18.91%
Bitumen 16.32% 21.52% 18.83%
LOBS 16.32% 21.54% 18.87%
LDO 16.32% + Rs.2.55/Ltr. 16.32% + Rs.3.50/Ltr. 16.32% + Rs.2.98/Ltr.
ATF (Domestic) 8.16% Rs.6.08/Ltr. Rs.5.56/Ltr.
Petrol 8.16% + Rs.13.26/Ltr. Rs. 15. 92/Ltr. Rs.15.44/Ltr.
Diesel. 8.16% + Rs.3.32/Ltr. Rs.6.08/Ltr Rs.5.56/Ltr.
The above tariff structure would ensure price neutrality and the revenue implications of the above proposals would be as follows:
Rs./Crores
Revenue Loss Option I Option II
Reduction in customs duty on crude and petroleum products by 5%/25% 9041 4522
Sub-Total 9041 4522
Revenue Gain
Increase in excise duty. on A TF 1015 858
Increase in excise duty rate of Petrol, Diesel Bitumen, Lobs, Naphtha, FO and LSHS 9857 4922
Total Gain 10872 5780
Net Gain 1831 1258
In case the revenue gain is sort to be neutralised, reduction in excise duty on petrol, diesel, ATF and LDO would need to be made of the order of Rs.0.28/Ltr and Rs.0.19/Ltr for Option I and Option II respectively.
Details of the workings are given in Annexure-I and II.
Annexure I (a) (option-I)
Excise Duty revenue (revised rates) (Rs./Crores) Current Excise Duty Rate Proposed Excise Rates so that RSPs remain same
Bitumen 246.33 16.32% 21.52%
LOBS 131.43 16.32% 22.08%
Naptha 1068.44 16.32% 22.08%
FO/ LSHS 812.23 16.32% 21.69%
LDO 130.59 16.32% 16.32%
Plus Rs.2.55/litre Plus Rs.3.50/litre
Petrol 1448.08 8.16% Rs.15.92/litre
Plus Rs.13.26/litre
Diesel 6019.44 8.16% Rs.6.08/litre
Plus Rs.3.32/litre
Revenue Gain - Excise Duty (A) 9856.55
Revenue Gain - Excise Duty (B) 1015.14
(ATF ExcIse Is proposed to be at par with HSD)
Sub Total (A+B) 10871.69
Revenue Loss - Customs Duty (C) 9040.67
Revenue Loss - Specific Excise Duty (D) 1831.55
Reduced by Rs.0.28 per litre on Petrol' Diesel
ATF and LDO to make the proposal revenue neutral
Sub Total (C+D) 10872.22
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Annexure - I (b) (Option-I)
Customs and CVD Revenue Loss on Crude and Petroleum Products
Duty Rate Nil on Crude and Reduction in products by 5%
Quantity MMT Customs Duty CVD Total