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Expert Panel asks Govt to levy 75 paise CESS on BS III grade gasoline and diesel

By TIOL News Service

NEW DELHI, JUNE 14, 2014: THE launch of Bharat Stage V (BS V) emission norms continues to be a distant dream for India. Although the Indian auto makers do manufacture such vehicles but only for exports purpose as India does have the system in place for the domestic market. As per the latest Report prepared by the Planning Commission Member, Mr Saumitra Chaudhury, has recommended that the Oil Marketing Companies require as much as Rs 80,000 Crore to upgrade their refineries and produce 100% BS V grade fuel.

To mobilise such funds, the Panel has found a way out in its Auto Fuel Vision & Policy 2025 and suggested a fresh levy of 75 paise cess per litre on all BS III grade gasoline and diesel.

The Panel has asked the Government to put the cess mechanims in place by July 1, 2014. If it is done now, the OMCs will be able to garner about Rs 64000 Crore by 2021-12.

The Report underlines: " ... the additional charge will not accrue to the oil companies but will be levied in the form of a High Sulphur Cess and accrue to the Oil Industry Development Board, and can be utilised to finance the capital investment required for refineries to upgrade themselves ...,” the report said.

Mr Chaudhury observes in the Report that the collections to the OIDB on account of both the “special fuel upgradation cess” and the “high sulphur cess” will thus be of the order of Rs 74,000 crore, which comes close to the estimate of Rs 80,000 crore referred to above required to meaningfully relax the financial constraints that can enable the refineries to proceed on the accelerated transition path. These funds will be extended for use to the refineries in terms of the OIDB’s mandate and rules. The Committee has recommended that it is desirable, considering the financially stretched conditions of the oil companies and the statutory nature of the investment obligation, that the Ministry of Petroleum & Natural Gas make the funds available from OIDB on relatively easy terms, both in respect of interest cost and repayment period.

While justifying the rationale the Panel notes that such a cess will eliminate the incentive to use BS III fuel when the BS IV grade fuel is available in the country in as many as 30 cities.


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