Deora asks FM to remove excise duty on diesel

New Delhi, Jan 23: Petroleum Minister, Murli Deora, today met Finance Minister, P Chidambaram, and sought removal of excise duty on diesel to contain inflation at 6.12 per cent, the highest in two years.

As part of pre-budget consultation, Mr Deora met Finance Minister for an hour and also sought infrastructure status for oil and gas and pipelines.

This is to encourage prospects in unexplored basins and promoting use of environment friendly natural gas as fuel.

''Yes, we are for reduction in excise duty on diesel. Despite the fall in international crude prices, oil companies continue to make a loss of Rs 0.50 a litre on diesel. Besides, such a duty reduction would help contain inflation,'' Mr Deora said after the meeting.

The current excise duty on diesel is 8.16 per cent plus Rs 3.32 a litre - which together is Rs 4.98 per litre. Last year, excise duty on diesel was Rs 3.41 per litre.

Revenues from excise duty on diesel has increased to Rs 24,214 crore in 2005-06 from Rs 16,338 crore a year ago. Revenue on diesel as percentage of total excise revenues has increased to 22 per cent from 16 per cent.

Mr Deora was also to seek an Income Tax holiday of 7-10 years in Oil Exploration and Production sectors.

The price of petrol was cut last by Rs 2 a litre and diesel by Re 1 on November 29, 2006, following the softening of international crude prices to below 60 dollars a barrel.

On Friday, the Petroleum Minister had ruled out any reduction, any immediate cut in petrol and diesel prices.

He said the Government would wait for the international crude prices to stabilise.

Mr Deora said the Government was closely watching the downward trend, but a decision could not be taken on the basis of crude prices falling below 50 dollars for just for a day or two.

The Government would take a decision about ''revising the possibility of any cut'' at an appropriate time, Mr Deora said.

However, he said due to the limited storage facilities, buffer stocks could not be increased immediately to take advantage of the lower prices, adding that the Government planned to increase the stocks to around one million tonnes of crude, but this would take some time.

The government has also decided to continue subsidy on kitchen fuels till March 31, 2010. The oil ministry has set the ball rolling to seek Cabinet approval in this regard and is suggesting changes for the entire subsidy to be borne through the Budget.

''As per strict instructions of Congress President Sonia Gandhi, the subsidies on kerosene and cooking gas will not be withdrawn.

The UPA Chief has asked the petroleum ministry to continue supplying the fuels, mostly used by the poor, at the same price,'' Mr Deora had said.

The subsidy on PDS kerosene and domestic LPG was to be phased out by March 31, 2005 for dismantling of the administered pricing mechanism (APM) for petroleum products. This deadline was extended by two years to March 31, 2007.

The government is incurring losses amounting to Rs 14,000 crore due to the subsidies.

Petroleum Secretary M S Srinivasan said state-run oil companies are incurring a loss of Rs 0.22 per litre on petrol and Rs 1.42 a litre on diesel. Kerosene is being sold at a loss of Rs 13-14 per litre and LPG at a loss of Rs 50 per cylinder.

UNI