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Diesel May Cost More For Industry Like Power Stations, Malls, Hospitals etc,By Yash, Section Business
The government is soon going to ask the bulk diesel-consuming sectors of the economy to pay market price. The new market retail price for diesel will be applicable only to buyers like power stations, malls, hospitals etc, making exception to the transport sector — railways and roadways. This is a move to compensate the losses suffered by the oil marketing companies, who are facing revenue shortfalls due to subsidised selling of all petroleum products.
At present, the transport sector consumes 51 per cent of diesel in the country followed by industry that accounts for 14 per cent consumption and agriculture sector, which has a 4 per cent share among others. Most of the commercial sectors in the economy are using diesel because the price of alternate fuels like naphtha and fuel oil have reached stratospheric levels thus increasing the cost of production. Power plants like NTPC switched to diesel a year back instead of naphtha because of the subsidy advantage. Another reason for the shift has been the shortage of coal. But, with this decision, the cost advantage is likely to go. The cost of the end product is also going to be high as these companies will have to pay market prices for diesel and they in turn will ask the consumers to fork out the same.
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The decision, which is still being pencilled, is that direct import of diesel will be sold at import price plus margins by the oil companies. In case of diesel being produced by oil companies domestically, the market price will be applicable, which is cost of production plus taxes and margins.
Experts, however, are wary of a decision like this and say that since the industrial growth is sluggish and is expected to slide further in the coming year, any such decision like this would only put further brakes in the sector. However, the finance ministry may be having an objection to this decision because on June 5, the customs duty on imported diesel has been brought down to 2.5 per cent from the 7.5 per cent level, thus hitting the revenue collection from this sector. The finance ministry has projected a loss of Rs 26,600 crore from the duty rollback decision taken recently. The commerce ministry could also be having certain reservations as regards this decision because most companies show exports of petroleum products from the country and import some of that quantity back from the high seas ,thus taking duty and foreign exchange benefits in this round tripping.
Diesel is the most widely used oil product in the country and its sales rose by 11.1 per cent to 47.63 MT in 2007-08, followed by petrol, whose sales increased by 11.2 per cent to 10.32 MT as compared to the previous year.
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