Union finance ministry wants the oil marketing companies (OMCs) to calculate under-recoveries from sale of fuel products based on export parity price rather than the presently followed import parity price.
The ministry wants OMCs to discontinue import parity price because the 2.5 per cent customs duty was adding to the under-recoveries of the state-run oil marketing companies without contributing any revenue to the exchequer.
If the export parity price is accepted, OMCs would lose the revenue equal to 2.5 per cent customs duty. But the government could save about Rs 18,000 crore in subsidy bills through this move.
Owing to sale of diesel, domestic LPG and kerosene below cost, state-run fuel retailers Indian Oil, Hindustan Petroleum and Bharat Petroleum together may incur an under-recovery of around Rs 160,000 crore.
State-run Oil exploration firms like ONGC are to meet about Rs 60,000 crore of this and the rest Rs 100,000 crore was to come from the government as cash subsidy.
Some reports suggest that traditionally domestic refiners enjoyed 5 per cent duty protection by way of higher customs or import duty on petroleum products (finished product) than on crude oil (raw material).
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