In its proposals to the Finance Minister for the Union Budget 2013-14, the message from the Petroleum Ministry is very clear -- lessen the subsidy burden on the oil public sector firms/units (PSUs). To lower the burden on oil PSUs, the first step will be to lower diesel usage, which accounts for more than 50 per cent of the losses or subsidy burden.
The Petroleum Ministry has proposed an additional excise duty of Rs 80,000 on diesel cars. "Out of the total estimated under-recoveries, around 56 per cent (Rs 74,317 crore) is on account of diesel alone," the ministry states in its Budget note, according to sources.
Referring to the report tabled by a panel headed by former Planning Commission member Kirit Parikh, the Petroleum Ministry said the additional excise duty will "not only discourage the dieselization of our economy, but will bring in additional revenue towards meeting the under-recoveries of the public sector oil marketing companies".
The Parikh report, tabled in February 2010, had supported the idea of additional excise duty on a diesel vehicle corresponding to the differential tax on the petrol to collect the same amount of tax from diesel vehicle users.
The ministry has also asked for an exemption of the 5 per cent import duty on liquefied natural gas (LNG).
It has recommended a 'declared goods' status for any kind of natural gas so that a uniform state tax can be imposed. Currently, the value added tax (VAT) on LNG and natural gas varies between 12.5 per cent and 20 per cent in different states and that creates substantial disparity. Citing coal, crude oil, LPG -- which are already under declared goods status with 5 per cent VAT - the Ministry has asked for similar status for natural gas.
Petroleum Ministry officials told NDTV that the incentives for usage of natural gas will not only make the cheaper and cleaner source of energy available but also reduce the usage of diesel and that will bring relief for the PSUs.
The Ministry has also put in a strong case for including petroleum products under the goods and services tax (GST) regime. In its note, the ministry has said that the partial implementation of GST for some petroleum products will push up costs for the sector as the states will levy service tax under the new regime and input credit (equal to the amount of service tax) cannot be availed of by the sector for "the excluded basket", the sources said.
"The move to keep these products outside the GST through a constitutional amendment would permanently deprive this sector of the advantages of the GST," the note adds.
On the direct tax front, the Petroleum Ministry wants to extend 'infrastructure' status to exploration and refining activities for the purpose of a 10-year tax holiday under Section 80-IA of the Income-Tax Act.
Other proposals of the ministry include removal of the Rs 50/tonne national calamity duty on crude oil, which was imposed in the 2003 Budget. "Though the Finance Bill, 2003, had indicated that this levy will be limited to one year only, the levy has been extended year after year. This has put an additional burden on oil refining companies," the note adds.