Duty cut on petrol, diesel to reduce under recoveries

New Delhi, Feb 28 (UNI) Welcoming the Finance Minister's move to reduce excise duty on petrol and diesel prices, Petroleum and Natural Gas Minister Murli Deora today said it will have a direct effect on the oil companies to reduce their under recoveries.

The move will not further cut the fuel prices as it was already reduced on February 15, Mr Deora said.

Mr Deora said the Oil Ministry will approach the Finance Ministry to issue extra oil bonds to further reduce the under recoveries, as the gap is still existing.

He said the bonds would be used to compensate oil firms for selling fuel at state-set discounted rates.

Mr Ravi Mahajan, Partner, Oil and Gas Practice, Ernst&Young said the oil and gas industry had several expectations from the Union Budget 2007, but the government has offered a mixed set of proposals to the industry.

The proposal to extend service tax to services rendered for exploration of oil and gas will affect the upstream industry, though the proposed reduction in excise duty of petrol and diesel from 8 to 6 per cent would benefit the oil marketing companies.

Separately, in line with the recent gas discoveries in India, the tax concessions offered for cross country natural gas distribution networks would provide a much needed impetus for laying pipelines and related infrastructure across the country, Mr Mahajan said.

''Finance Minister must be congratulated for the well balanced Budget and with focus on Aam Admi. In the oil sector, he has kept his promise and reduced excise duty on petrol and diesel. When we reduced the prices of petrol and diesel on February 15, the Finance Minister had committed to partly meet the reduction through changes in duties,'' Mr Deora said after the Budget.

He said he was happy to note that the Finance Minister has fulfilled the assurance and met the long pending demand of the oil industry. Elimination of excise duty on bio diesel will give a boost to environment friendly fuels.

The oil industry is also happy on the reduction of CST by 1 per cent. This will assist in inter-State movements of petroleum products in a cost effective manner.

Gas transport infrastructure will rapidly expand with grant of infrastructure status under section 80 I. This will enthuse companies to come forward in building gas networks in the country, the Petroleum Minister said.

UNI