Govt may use oil cess to cut losses of cos
Funds collected through the oil industry development cess is likely to be used for minimising oil marketing companies’ (OMCs) losses on account of selling cooking gas and kerosene below cost price.
By Rajeev Jayaswal, TNN |
NEW DELHI: Funds collected through the oil industry development cess is likely to be used for minimising oil marketing companies’ (OMCs) losses on account of selling cooking gas and kerosene below cost price.
The annual amount collected as per the provision of Oil Industry Development Act exceeds Rs 5,000 crore. “There is a proposal to utilise this fund in a more efficient manner. One of the suggestions is to use this fund in providing subsidy on kerosene and LPG. The matter is under consideration,” a source in the government said.
Even as the total cess collection under the act has exceeded Rs 55,966 crore (as on March 31, ’05), only Rs 902 crore has been given to the Oil Industry Development Board (OIDB). The board was constituted in 1975 to provide financial assistance for the development of the oil sector.
It is understood that the Planning Commission has also emphasised the need to use the fund in adjusting kerosene and LPG prices which could contain subsidy at reasonable levels. It also argued in favour of increasing the cess on petroleum products to generate additional resources for financing subsidy.
Sources in the finance ministry, however, argued against the perception that a large part of the Rs 55,966-crore cess fund is lying idle. It said that the expenditure on oil industry had far exceeded the cess collections.
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Its argument is based on the logic that the definition of “oil industry” encompasses all activities directly or indirectly connected with exploration, production, and marketing of mineral oil and production of fertilisers and petrochemicals.The issue has also been raised by the Standing Committee on Petroleum and Natural Gas. It said that “there was no justification in levying cess if the amount generated from it was not being utilised for the sector”.
The committee suggested that a “price stabilisation fund” should be created by using the money collected from the cess. The committee also suggested that a part of the cess amount could also be utilised to provide subsidy on kerosene and LPG.
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