Date:14/08/2005 URL: http://www.thehindubusinessline.com/2005/08/14/stories/2005081401740100.htm

Back To offset losses suffered by oil cos — Ministry wants part of cess amount released to oil board

Richa Mishra

New Delhi , Aug. 13

WITH international oil prices continuing to soar and a majority of the domestic oil companies suffering cash losses, the Petroleum Ministry has again petitioned the Finance Ministry to release `at least' a part of the approximately Rs 60,000 crore raised from the cess levied on crude oil since 1989.

The request is to release the money to the Oil Industry Development Board (OIDB), which plays a major role in providing financial assistance to the oil sector.

Though the Ministry's earlier attempts to get a larger pie of the amount for OIDB have met with little success, the Petroleum Ministry renewed the request through a letter earlier this week in view of the "compelling circumstances" facing the oil industry now.

The oil marketing companies have suffered losses in the first quarter of the current year, and many companies have put off investment plans announced earlier.

The Oil Industry (Development) Act provides for the collection of cess as a duty of excise on indigenous crude oil and natural gas. The board, established in 1975, renders assistance to the oil industry by way of payment of loans for projects and disbursement of grants for research and development, besides other development activities.

The total amount collected as cess till date would be close to Rs 60,000 crore, sources told Business Line. As per the estimates, the Central Government had collected Rs 51,007.60 crore as cess till March 31, 2004. Out of this, OIDB had received only Rs 902.40 crore till March 2004.

For the current fiscal, it is estimated that close to Rs 5,000 crore would be collected as cess. In 2004-05, the amount collected from cess by the Government was marginally up (2.62 per cent) compared to the previous year.

The Government had collected Rs 4,891 crore in 2004-05, against Rs 4,766 crore in 2003-04.

Incidentally, the Left allies of the United Progressive Alliance Government, which have been opposing any price hike in petroleum products, have proposed the creation of a separate Price Stabilisation Fund. This fund could be created using the money collected from cess on indigenous crude at the rate of Rs 1,800 per tonne under the Oil Industry Development Act to bring in stability in the prices of petroleum products, the Left parties said.