Lok Sabha Question No. 212 (STARRED), answered on 2016-08-01
Subject: Cess on Crude Oil
Ministry: PETROLEUM AND NATURAL GAS
Asked by: SUMEDHANAND SARASWATI, OM PRAKASH YADAV

## LOK SABHA STARRED QUESTION NO.212 TO BE ANSWERED ON 1 ST  AUGUST, 2016

## CESS ON CRUDE OIL

## *212.   SHRI SUMEDHANAND SARSWATI: SHRI OM PRAKASH YADAV:

## isVªksfy;e vkSj izkÑfrd xSl ea=h

## Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- (a)  whether  the  Government  has  taken  note  of  dwindling  crude  oil  prices  and  also  high inventory globally and if so, the details thereof;
- (b) whether India has taken any advantage of this drop in crude price and if so, the details thereof;
- (c) whether 20 per cent cess is being levied on domestically produced crude oil and if so, the details thereof and the reasons therefor;
- (d) whether the imposition of the said cess has impacted the upstream companies such as Oil and  Natural  Gas  Corporation  and  Oil  India  Limited  and  if  so,  the  details  thereof  and  the reaction of the Government thereto; and
- (e)  whether his Ministry has requested the Ministry of Finance to review the said decision and if so, the details thereof along with the response of the Ministry of Finance thereto?

## ANSWER

## isVªksfy;e vkSj izkÑfrd xSl ea=h ( Lora= izHkkj ) ¼Jh /keZsUnz iz/kku½

MINISTER OF STATE (I/C) IN THE MINISTRY OF PETROLEUM AND NATURAL GAS (SHRI DHARMENDRA PRADHAN)

(a) to (e):    A statement is laid on the Table of the House.

## Statement referred to in reply to parts (a) to (e) of the Lok Sabha Starred Question No. 212 asked by Shri Sumedhanand Sarswati and Shri Om Prakash Yadav to be answered on 1 st August, 2016 regarding 'Cess on Crude Oil'.

- (a): The prices of crude oil in the international markets started falling from July 2014. The average price of Indian basket crude oil during the last 3 years and the current year are given below:

|       |   2013-14 |   2014-15 |   2015-16 |   2016-17 (up to 25.7.2016) |
|-------|-----------|-----------|-----------|-----------------------------|
| $/bbl |    105.52 |     84.16 |     46.17 |                       44.01 |

Note - The Indian basket of Crude Oil  represents a derived basket comprising of Sour grade (Oman & Dubai average) and Sweet grade (Brent Dated) of Crude oil processed in Indian refineries in the ratio of 71.03:28.97 during 2015-16 (for 2016-17).

- (b): Due to reduction in international crude oil prices, the crude oil import bill for the country has reduced significantly.  The details are given below:

|                                            | Quantity                                   | Value                                      | Value                                      |
|--------------------------------------------|--------------------------------------------|--------------------------------------------|--------------------------------------------|
| Year                                       | MMT                                        | $ Billion                                  | Rs. Crore                                  |
| 2013-14                                    | 189.2                                      | 143.0                                      | 864875                                     |
| 2014-15                                    | 189.4                                      | 112.7                                      | 687416                                     |
| 2015-16 (P)                                | 202.9                                      | 64.0                                       | 416361                                     |
| 2016-17 ( April-June) (P)                  | 53.2                                       | 15.8                                       | 105624                                     |
| Source: Petroleum Planning &Analysis Cell. | Source: Petroleum Planning &Analysis Cell. | Source: Petroleum Planning &Analysis Cell. | Source: Petroleum Planning &Analysis Cell. |

The subsidy /under recovery on sale of sensitive petroleum products has also reduced as per details given below:

(Rs. Crore)

| Particulars    |   2013-14 |   2014-15 |   2015-16 |   Q1 2016-17 |
|----------------|-----------|-----------|-----------|--------------|
| Diesel         |     62837 |     10935 |         0 |            0 |
| PDS Kerosene # |     31255 |     24804 |     11496 |         1967 |
| Domestic LPG # |     52247 |     40569 |     16074 |         2128 |
| Total          |    146339 |     76308 |     27570 |         4149 |

#  Includes  Subsidy  under  'PDS  Kerosene  and  Domestic  LPG  Subsidy  Scheme,  2002'  &  'Freight  Subsidy  (For  Far-Flung Areas) Scheme, 2002' on payment basis.

- (c) to (e): Vide notification no 773 dated 28 th March, 2016, the OID cess on the crude oil  production  from  the  fields  under  nomination  regime  and  pre-NELP  exploratory  regime has been revised from Rs. 4500 per MT to 20% ad-valorem basis effective from 1 st March 2016.
- Since  OID  cess  is  a  production  levy  and  is  not  passed  through  to  the  buyers,  any upward revision in OID cess rate results in higher tax incidence to the upstream companies under nomination regime such as ONGC and OIL and private/joint venture companies under Pre-NELP exploratory regime such as Cairn India Limited, ONGC, GSPC etc.

In  view  of  the  concerns  expressed  by  the  upstream  oil  industry,  this  Ministry  has requested to Ministry of Finance to revise the rate of OID cess @ 10-12% ad-valorem instead of current level of 20% or alternatively consider introducing of a graded system of cess rate.