New Delhi: To replenish the state exchequer, the Centre is likely to take strong measures in the oil and gas sector in the upcoming budget. The Center may impose customs duty on crude oil in the budget.

Finance Ministry has reasoned that petroleum subsidy has dented government’s treasury and with the waiver of customs duty on crude oil situation has further worsened. However, it will increase the price burden on the masses.

Seeing a strong surge in the crude oil prices in June 2011, it was decided to abolish the custom duty on import of petrol, diesel, LPG and crude oil. Discontinuation of 5 percent custom import duty is estimated to cost Rs 48,000 crore to the government exchequer in FY 2011-12. However, if the decision would not have been taken then more price rise of petrol had been witnessed. 

According to sources, discontinuation of custom duty on crude oil has put government in all kinds of losses.

Since it is discontinued, on the average crude oil prices have gone up by USD 30 per barrel.  By selling petroleum products on the prices below the import cost, oil companies are expected to account a loss of Rs 1,40,000 crore in the current year.

On the broader terms, half of the burden of Rs 70,000 crore will be borne by the Finance Ministry. Rs 30,000 crore has already been paid to oil companies. 

In the pre-budget meet between Petroleum Ministry and the Finance Ministry this issue had been raised. Finance Ministry has clearly stated that the objective of discontinuation of customs duty on import has not been met. It is actually increasing the burden on the state exchequer.

According to experts, due to political reasons retail prices of petroleum products has not been raised.