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Government to give full excise duty exemption
November, 18th 2010

The parliamentary panel on petroleum and natural gas has asked the government to give full excise duty exemption to refiners in the North East region that are struggling to cope with lean demand and limited crude availability.

Now, four public sector refiners in the region IOCs Guwahati Refinery, Digboi Refinery and Bongaigaon Refinery and Petrochemicals (BRPL) and BPCLs subsidiary Numaligarh Refinery get 50% exemption on excise duty. This years union budget retained this concession for the 2010-11 fiscal.

The parliamentary panel also told the Centre to get the Assam government to remove the entry tax it levies on crude, that gets added to the cost of crude for North Eastern refineries and impair their profitability. Since the demand for fuel in the region is limited and selling it outside the region would involve transportation cost, these refiners are forced to operate below their capacity, the panel noted.

The panel also wanted state-owned oil producers ONGC and Oil India to step up crude production from North East as it will go a long way in optimising the capacity utilisation of North East refineries.

ONGC officials said that the entire estimated production from its Ravva field of 1.44 million metric tonne this fiscal has been nominated to IOCs Bongaigaon refinery. Besides, the state-owned oil producer is planning to drill at least five extra wells this year in the ageing Ravva field to step up production.

The panel with members from both houses of Parliament also noted that among 15 major state-owned refineries, only two IOCs Digboy refinery and BRPL recorded higher gross refining margins (GRM) than that of private sector refiner Reliance Industries (RIL) in the last four years. GRM is the gap between the cost of crude oil and the average price realised on finished petroleum products.

While the refining margin of RIL ranged between $ 10.3 to $ 15 a barrel in the three years up to 2007, that of some state owned refiners stood at $1.64 a barrel and that of IOC Digboi stood at $21.9 a barrel. The committee asked the government to ensure that the inefficient state-owned refiners control their operating cost and enhance their refining margins.

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