Petroleum and gas may be only sector to be left smarting after the Union Budget is presented on Friday.

According to analysts, while the Budget is expected to be positive for most sectors and in certain cases just neutral, the petroleum industry may not have much to cheer about.

The oil refining sector industry has demanded customs duty on inputs and end-products to be brought down to 10 per cent and 20 per cent, respectively.

But the Budget is unlikely to make critical changes in customs duty rates, though there could be an upward revision in the price of liquefied petroleum gas by Rs 20-40 a cylinder and kerosene by Re 1 a litre.

The Petroleum Federation of India (Petrofed), an association of public and private sector oil firms, has proposed the removal of 5 per cent customs duty on imported liquefied natural gas and the levying of a uniform 4 per cent sales tax on LNG throughout the country.

It has also demanded infrastructure status to pipelines, and maintaining the duty differential between crude oil and petroleum products at 10 per cent.

The task-force on indirect taxes, headed by Vijay Kelkar, has recommended a 5 per cent import duty differential between crude oil and petroleum products. It has proposed a basic customs duty of 5 per cent for crude oil and 10 per cent for petroleum products by FY05.

The Associated Chambers of Commerce and Industry in India has proposed that the customs duty on crude to be brought down to nil in the Budget, and that the duty on all products should not exceed 15 per cent.

It has also asked for concessional rate of customs duty on sulphurised kerosene oil for public distribution system be withdrawn. High-speed diesel, which is used as a fuel in industries, should be allowed as an eligible input for the purpose of availing central value-added tax (Cenvat) credit.

Under the current structure for oil and gas the customs duty on crude is 10 per cent, 20 per cent on MS / HSD / furnace oil (FO) / low sulphur heavy stock (LSHS) and aviation turbine fuel (ATF), 10 per cent on LPG, SKO and naphtha and 20 per cent on other petroleum products.

The domestic producers have a duty protection of 6-7 per cent. The Kelkar Committee has recommended reduction in the customs duty on most products and also removal of special duties on MS and HSD.

However, the market expect that if the duty on crude is brought down to 8 per cent, to 15 per cent on MS/HSD, FO/LSHS and ATF, to 8 per cent on LPG, SKO and naphtha and to 15 per cent on other petroleum products would also entail a marginal reduction in the duty protection to 5 per cent.

Moreover, currently oil marketing companies are still bearing the brunt of LPG and SKO subsidies of Rs 100 per cylinder and Rs 2.4 per litre, respectively.

Market analysts opine that full compensation to oil companies is unlikely, especially after their strong quarterly results on the back of inventory gains, a partial bridging of shortfall is expected. The government may also announce roadmap for subsidy reduction.

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