Budget 2001: Full Coverage

The duty on diesel has been increased from 12 per cent to 16 per cent andthat on motor spirit (petrol) has been increased to 32 per cent (16 per centCenvat plus special excise duty of 16 per cent).

Significantly, the Union petroleum minister Ram Naik, soon after the Budget,categorically ruled out any immediate fallout of this hike, in the form of acorresponding increase in the prices of petrol and diesel.

As per Mr Naik, "this will not amount to any increase in the prices ofdiesel and petrol". He also agreed that the oil pool account will have tobear the burden of this duty hike.

However, the minister said, "ways will be devised to manage the oil poolaccount". He, however, did not comment on the possibility of issuance of oilbonds and said details in this regard will be worked out later.

Increasing excise duties on diesel and petrol, without increasing the pricesat the retail level, would put a burden on the oil pool account and the oilpool deficit will also increase substantially from the current levels. Theborrowings of the public sector oil companies would also go up leading tohigher interest costs.

In addition to excise duties, LNG has been exempted from counter vailingduty (CVD) but the duty on CNG has gone up to 8 per cent from zero. This,sources said, can result in an increase in the prices of CNG. A duty of 5per cent has also been imposed on kerosene under public distributionsystem.

However, there has been no change in the import duty on crude oil orpetroleum products. This means that the refineries will continue to enjoyhigh gross refinery margins. However,imposition of 8 per cent excise duty onCNG could hurt suppliers of piped Gas such as Indraprasth Gas and MahanagarGas and Gujarat Gas. The removal of CVD on LNG is also expected to have apositive effect in the users industry mainly the power and fertilisersectors. This move will extend some benefit to the users besides speedysigning of the MoUs between the LNG suppliers and the users.