NEW DELHI, May 1: The Petroleum Ministry has made a fresh pitch for a 10 per cent cut in excise and customs duties on crude oil and petroleum products, even as the Union Budget comes up for a debate in Parliament.

The demand for duty relief is a last ditch effort to stem the fast swelling oil pool account deficit, estimated to be growing by Rs 820 crore every month. A 10 per cent duty reduction on imports of crude oil and petroleum products and another 10 per cent excise cut on refinery products, could easily shore up the oil pool account by another Rs 5,000 crore, said Union Minister of State for Petroleum and Natural Gas, T R Baalu.

The duty relief had been part of the ministry's demand during the pre-Budget exercise, but did not find a mention in the finance minister's speech.

``Till the Appropriation Bill is passed, we still have hope,'' a confident Baalu said.

He said Prime Minister I K Gujral was ``being apprised of the situation.'' The minister did not give any credence to reports that the Prime Minister had initiated a fresh Cabinet note on the oil price hike.

The duty reliefs, Baalu said, would obviate the need for raising prices of petroleum products for at least another six months, by reducing the burden on oil companies, which are reimbursed from the oil pool account for subsidies on products of mass consumption. The national oil companies now pay a 27 per cent duty on imported crude, including the two per cent special import duty.

The refineries also pay 20 per cent excise on motor spirit, 15 per cent excise on aviation turbine fuel (ATF) and 10 per cent excise on kerosene. High speed diesel entails an excise duty of 15 per cent. Baalu argued that the duty reliefs could temporarily ease the cash crunch of oil companies that have not been reimbursed from the oil pool account.

The oil pool account balances the variations in the elements of standard cost of petroleum products with surcharges collected on sales. In other words, it juggles subsidies on petroleum products of mass consumption like kerosene, liquefied petroleum gas (LPG), LSHS and naphtha used as fertiliser and high speed diesel, with surcharges on the standard cost of products confined to higher income brackets, like motor spirit and ATF.

It also pays for the import of crude. The differences in the inflows and the outflows results in the surplus or deficit in the oil pool account. The Economic Survey had estimated a Rs 15,500 crore deficit in the oil pool account by end March this year from Rs 5,700 crore on March 1996.

The oil pool deficit, which also tantamounts to dues of the national oil companies from the account, is believed to be growing by roughly Rs 800 crore since then.

The continuing subsidies on petroleum products, like Rs 5 per litre on kerosene, a Rs 2 per litre subsidy on diesel oil and a subsidy of Rs 70 for every 14.2 kg cylinder of LPG, is also believed to have gone beyond the Rs 18,440 crore estimated at the end of the 1996-97 fiscal.

Prices of petroleum products were increased in July last year to contain the growing deficit in the oil pool account. Prices of aviation turbine fuel and naphtha (other than fertilisers) were increased by 10 per cent, diesel prices went up by 15 per cent, motor spirit became 25 per cent costlier and prices of other petroleum products increased by 30 per cent.

Kerosene for domestic use was spared a hike in prices in deference to the economically weak segments of society. The subsidy on petroleum products, which dropped from Rs 13,940 crore to Rs 9980 crore after last year's oil price hike, sprang back to Rs 18,440 crore within the ensuing eight months.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.