Date:25/05/2008 URL: http://www.thehindu.com/2008/05/25/stories/2008052560540100.htm

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Deora briefs Manmohan on ‘harsh realities’

Special Correspondent

Case for cut in import duty on crude

Meet comes in the wake of Left opposition to price hike
Detailed “status report” on oil industry’s losses submitted

NEW DELHI: Petroleum and Natural Gas Minister Murli Deora on Saturday met Prime Minister Manmohan Singh and apprised him of the “harsh ground realities” in the petroleum sector.

He said the issue of skyrocketing global crude oil prices and the massive revenue loss being faced by Oil Marketing Companies (OMCs) had to be addressed at the earliest. This was Mr. Deora’s second meeting with Dr. Singh in 24 hours.

The meeting came in the wake of the strong assertion by the Left parties that they would oppose any move to hike the prices of petroleum products. They have been demanding a revisit of the massive excise and customs duties levied on petrol and diesel.

On Friday, the Principal Secretary to the Prime Minister held a meeting with the Petroleum Secretary and the Finance Secretary as well as the heads of the OMCs to sort out differences and work out an acceptable solution.

Although Mr. Deora refused to divulge the details of the meeting with the Prime Minister, official sources said he submitted a detailed “status report” on the need to urgently address the issues facing the oil industry.

The sources said Mr. Deora informed the Prime Minister that there was certainly a case for cut in the customs import duty on crude oil as the duty of 5 per cent was imposed when the price of crude oil was $35 a barrel. Now the prices have touched $135 a barrel and the duty remains unchanged.

Similarly, it was pointed out, there was need for both the Petroleum and Finance Ministries to make suitable adjustments in the duty structures in order to provide a cushion to the OMCs without burdening the common man with a massive hike.

Mr. Deora told Dr. Singh that enhanced oil bonds were also not going to help the situation as under-recoveries were likely to go up to Rs. 200,000 crore this fiscal from Rs. 77,000 crore during 2007-08.

The Minister is understood to have suggested to the Prime Minister that a mix of marginal price hike along with a cut in import duty on crude oil and downward re-adjustment in the excise duty structure was the only solution to the present problem.

Sources said the Prime Minister was likely to meet both Mr. Deora and Finance Minister P. Chidambaram soon after getting a feedback from his own officials about the real situation in the wake of a spurt in crude oil prices.