India to reduce excise duties

The government of India announced in February that excise duties on petrol and diesel fuel will be reduced from 8% to 6% for fiscal year 2007-2008. Oil marketing companies (OMC) like Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCL), Reliance Industries Ltd. (RIL) and Essar Oil can look forward to improving margins from the sale of petrol and diesel fuel, provided crude oil prices remain soft. But while IOC and BPCL welcome the cut in excise duty, their subsidiaries, Bongaigaon Refinery and Petrochemicals Ltd. (BRPL) and Numaligarh Refinery Ltd. (NRL), will lose the privilege of retaining half of the excise duty collected to compensate them for their locational disadvantage. Both refineries are located in the northeastern State of Assam. The cut in excise levies is not likely to be passed on to retail prices, it was reported due to underrecoveries by the OMCs.. (March 1, 2007)