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ONGC, OIL, Cairn India seek cut in cess on oil

State-owned oil producers ONGC and Oil India as well as private sector Cairn India have asked the government to cut cess on crude oil they have to pay in view of slump in prices.

The producers want the government to levy ad-valorem rate of cess which will result in higher payouts when prices are high and lower payout when rates fall. Currently, ONGC and OIL pay a cess of Rs 4,500 per ton on crude oil they produce from fields given to them on nomination basis. Cairn has to pay the same cess for oil from Rajasthan block.

Their association, PetroFed last week wrote to Revenue Secretary Hasmukh Adhia and Oil Secretary KD Tripathi seeking levy of 8% cess on price of crude oil realised.

The Oil Industry (Development) Act, 1974 provides for collection of cess as a duty of excise on indigenous crude oil. Cess incurred by producers is not recoverable from refineries and thus forms part of cost of production of crude oil. The cess was levied at Rs 60 per tone in July 1974 and subsequently revised from time to time.

“During 2005-06, when the crude oil prices had increased from an average of $40 per barrel to $60 per barrel, OID Cess was increased from Rs 1,800 to Rs 2,500 per ton from March 1, 2006.

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