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Root cause

  • 14/11/2003

Root cause A wide variety of low priced fuels and solvents in the market are an immediate enticement to greed. High taxes on petrol make it vulnerable to adulteration with cheap solvents and naphtha. Diesel is easily mixed with subsidised kerosene and cheaper LDO. Says Rita Pandey, Fellow, National Institute of Public Finance and Policy, “The difference in duty structure is the main motive for indulging in adulteration. Any rationalisation of duty structure could help in at least reducing adulteration cases.”

Tax policies work at cross-purposes. To increase domestic availability of kerosene and reduce the scope for its unauthorised diversion from the public distribution system (PDS), government introduced a parallel marketing scheme by decanalising kerosene. Today, private persons/agencies can import kerosene and sell at commercial rates. April 1, 2002 onwards, the customs duty on imported kerosene was reduced from 35 per cent to 20 per cent to support the scheme. But this cheap kerosene has become the most attractive adulterant.

Oil refineries are incensed. While diesel sales increased by only 0.6 per cent in 2002-03, cheap kerosene imports shot up by 130 per cent. Between 2000 and 2003, kerosene imports more than doubled: from 0.30 million metric tonnes to 0.69 million metric tonnes. Alarmed at this trend, in August 2003, the Standing Committee on Petroleum and Chemicals recommended a ban on the import of kerosene oil and a higher sales tax, to stop adulteration.

In a letter to the Union Ministry of Petroleum this August, IOC Chairman M S Ramachandran urged a hike in customs duty on superior kerosene oil (SKO) imports to 35 per cent

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