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Customs duty collection for the current fiscal has been below the targeted level mainly on account of low crude-oil prices. However, not everyone is complaining, especially not the refineries. Low oil prices have resulted in the oil-pool account showing a surplus. This has prompted the centre to redeem the entire petro bonds within the current fiscal, 60 per cent of which has been redeemed.
The surplus in oil-pool account is likely to continue in the near future as international crude-oil prices are likely to remain low. The current price rise was on account of two reasons--the threat of Iraq being attacked by the US, and the seasonal demand for heating oil. After the jump in the previous week, oil prices have declined by almost 30 cents per day on account of speculators covering their long positions as the tension in the Middle-East seems to have eased.
In other words, traders are not expecting any big seasonal demand. This is despite the fact that there have been huge cuts on the supply side. The most recent has been the oil cut announced by Iran to the tune of 2,04,000 bpd. However, the persistent drop in oil prices has had little effect on Opec nations, who continue to violate their quotas. The compliance of nine countries to the quota has been to the extent of 83 per cent in October, against 81 per cent the previous year.
In short, any rise in demand is likely to be met by an increase in supply from the Opec countries, which is likely to keep oil prices low. This does not augur well for customs duty collection. To meet this shortfall, the government is contemplating introducing a cess on petro products, which could further aggravate recession.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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