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Govt. Removes Rs. 15 Petrol Tax

Jan 15, 2011 2:21:04 PM - thesundayleader.lk
  • But Rs. 25 Excise Duty Remains

Government on Monday removed the Rs. 15 import tax levied on petrol in order to give relief to downstream petroleum oil operators who have been hit due to rising crude and petroleum oil prices in the world market, but continue selling fuel at subsidized rates at the pump.
However the Rs. 25 excise duty on a litre of petrol and Rs. 2.50 on diesel will remain. Kerosene is not subjected to an excise duty. Budget 2011 also removed the 12% VAT on petrol.  Diesel and kerosene were however not subjected to VAT.
Port and Aviation Levy (PAL) of 1.5% at the point of import will also remain.
“The removal of the Rs.15 import tax made by the Petroleum Ministry will offset the need to hike petrol prices which currently is being retailed at Rs. 115 per litre at the pump in Colombo and in the suburb,” a source close to CPC told The Sunday Leader.
The other downstream petroleum oil operator is Lanka India Oil Company PLC (LIOC).
However another CPC source said that the removal of the tax would also help the CPC to keep a small margin.
He however said that due to rising oil prices in the world market, CPC was currently losing between Rs. 6-7 on a litre of diesel and Rs. 25 on kerosene. These two commodities are currently being retailed at Rs. 73 and Rs. 52 a litre respectively.
But there will be no price revision for the moment, he said.
The source further said that as a result of CPC selling fuel at a subsidized rate to the CEB and other consumers, it was incurring a Rs.2.4 billion monthly loss.
The loss to the CEB was mainly due to selling heavy sulphur fuel to the CEB at Rs. 40 a litre, whereas its import cost was Rs. 60 and selling low sulphur fuel to the Kerawalapitiya power plant at Rs. 52 a litre on a Cabinet decision made in September of last year, whereas its import cost was between Rs. 58-59 a litre.
If the CEB were to buy it at cost, it will then have to raise tariffs, the source said. The CEB from this month has raised domestic tariffs by 8%, while subjecting similar or higher increases to the commercial and industrial consumer as well.  However the sale of diesel oil to the CEB is determined as per a pricing formula. As at last year, CEB’s total outstanding to the CPC was Rs. 56 billion. The Treasury had said that they will compensate CPC for this loss, the source said.
Meanwhile LIOC Managing Director K.R. Suresh Kumar said on Monday that he was incurring a Rs. 18 loss on a litre of petrol and Rs. 21 on diesel by selling those at current prices. He said that fuel prices were not revised the whole of last year and the time was now ripe for a revision.
Kumar further said that at the peak of the recession two years ago, crude oil prices crashed to US$ 38 a barrel and petrol to US$ 40.   But since then those prices had had risen to US$ 91 and US$ 106 a barrel respectively, he added. The Government source also said that it’s up to the Treasury to recompense CPC and LIOC for selling subsidized fuel at the pump.