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Oil ministry seeks uniform tax on LPG to check gas theft |
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NEW DELHI: The oil ministry is seeking a uniform tax for all cooking gas sold in the country to reduce the wide price gap between domestic and heavily taxed commercial supplies, and discourage illegal diversion of cylinders meant for households.
Liquefied petroleum gas (LPG) attracts no tax when used by households for cooking. But a basic customs duty of 5%, additional customs duty of 8%, and a central excise duty of 8% are applicable on the fuel used for commercial purpose, a differential that incentivizes many commercial users to steal gas meant for domestic use.
Another major attraction though is the subsidy the government provides to domestic users although the amount of subsidy has sharply fallen in the past year following the global commodity crash. "We have sought the help of the ministry of finance to have a uniform tax pattern with all kinds of LPG consumers," oil minister Dharmendra Pradhan said, adding that a uniform tax would have "not much adversarial impact on revenue".
Pradhan said this will help government check the leakage in the system that has already been significantly plugged with the implementation of the direct cash transfer for LPG subscribers. About 14.5 crore of the total 18 crore LPG consumers have joined the government's cash transfer programme already.
Analysts said the government could either waive duties on commercial LPG and recover the foregone revenue by imposing taxes on dirty fuels like fuel oil or impose the same rate on both domestic and commercial gas. The second option may lead to either increase in the consumer prices, which may not be politically palatable, or an increase in the government's subsidy burden, they said.
"The uniform rates will help boost commercial consumption of LPG," said Satwant Singh, a former executive director (LPG) at Indian Oil Corporation, the country's top distributor of cooking gas. Singh said it will also help private players such as Reliance Industries since they are mostly present in the commercial segment.
The government has also directed state oil companies to introduce transparent and lighter cylinders of different sizes to check cooking gas theft and bring more convenience to customers, Pradhan said.
Meanwhile, the oil minister also said that India was renegotiating the long-term contract to lower the purchase price of the liquefied natural gas (LNG) from Qatar's Ras-Gas but gave no timeframe on how soon a deal could be struck.
"Petronet and all the stakeholders are discussing with RasGas, and we are hopeful that with a changing energy market and LNG pricing, RasGas will cooperate. Our prime minister has put this issue in front of the leadership of Qatar. I have talked to my counterpart in Qatar," Pradhan said, adding that he was hopeful that "India's burden will be reduced".
Petronet LNG, the country's largest importer of gas, is locked in a long-term contract with RasGas to purchase 7.5 million metric tonne of LNG annually. The price under the contract is almost double the spot rate, forcing it to forego about a third of contracted amount so far this year. If Petronet is not able to renegotiate the deal, it may have to take a hit of about Rs 10,000 crore at the end of 2015 as it is bound by the 'take or pay' obligation under which it must pay even for the quantity not drawn.
Source : economictimes.indiatimes.com
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