Is big beautiful? Petro cos think so

The petroleum sector will be one of the key beneficiaries of the government’s policy to cut customs duty on project imports above Rs 5 crore. Since most refinery projects have high capital costs and an import component in the range of 20%, the duty cut in project imports is expected to lower costs of upcoming refineries like IOC’s Paradeep refinery, BPCL’s Bina refinery or HPCL’s Bhatinda refinery.
However, a more significant fallout of the duty changes will be for direct importers of petro products. With the government doing away with the special additional duty of 4%, bulk importers and end users are expected to gain as imports of petroleum products would be cheaper. This may not be good news for domestic companies as coastal consumers and some bulk consumers may choose to import on their own. Industry sources said, Essar Oil, which currently meets its entire petrol and diesel requirements for marketing through imports, will be the biggest beneficiary of the SAD demise.
The company has already been selling its products at a discount of 30-40 paise per litre owing to the cost advantage from imports. Essar, which has not yet set up its refinery, is taking advantage of its marketing licence by primarily importing petroleum products on a bulk basis. �The latest effective reduction of 10.08% in import duty will provide further leeway to Essar Oil to price its retail products more competently, domestic manufacturing-cum-marketing companies will now be under more pressure to compete with imports,� company sources said.