The Ministry of Petroleum and Natural Gas has asked the Finance Ministry to consider reducing excise duty on petrol to offset the revenue loss incurred by public sector oil marketing companies (OMCs) for selling it below market price.
This information was given by S. Jaipal Reddy, Minister of Petroleum & Natural Gas, to the Lok Sabha on Thursday.
The OMCs, in order to mitigate losses on sale of petrol, have suggested that either fuel be declared a regulated product temporarily and cash compensation be provided or excise duty be reduced from Rs 14.78 a litre by an equivalent amount to the under recovery on it.
The OMCs have incurred under-recovery of Rs 2,100 crore on petrol sale during the first quarter of current fiscal.
Indian Oil Corporation has reported that under recovery on petrol sale has gone up from Rs 1.37 a litre in the first fortnight of August to Rs 3.85 a litre in the second fortnight, effective August 16.
To a separate question on whether the Government is aware of the costing procedures of petrol and diesel for sale by the OMCs, Minister of State for Petroleum & Natural Gas R.P.N. Singh informed Lok Sabha that the companies pay refinery gate price based on trade parity price for purchase of fuels from refineries.
The trade parity price is determined based on prices prevailing in the international market, he said. The following elements are added to the refinery gate price – excise duty, inland freight up to the market, marketing margin, value added tax and local levies, and dealers commission.