The Hindu : Karnataka / Bangalore News : CITU seeks ‘windfall tax’ on private oil firms

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Wednesday, May 07, 2008
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Karnataka

Karnataka - Bangalore

CITU seeks ‘windfall tax’ on private oil firms

V. Sridhar

Bangalore: The Centre of Indian Trade Unions (CITU) has demanded that the Government impose a “windfall tax on the super profits” made by the private sector oil companies. In a letter to the Prime Minister on May 3, CITU president M.K. Pandhe pointed out that in the last tow to three years the profits of private oil companies in India had been disproportionately higher than the increase in crude oil prices.

Mr. Pandhe argued that with crude oil in oil markets trading at about $120 a barrel, private contractors involved in the oil and gas extraction business in India were making “super profits” because they were allowed to use the “import parity” principle while fixing prices. The price, he argued, had no relation to the actual cost of extraction of crude in India. He pointed out that the price was about $30 a barrel when these companies signed their Production Sharing Contracts (PSC) with the Government. Oil companies, he said, were now making “additional gains” to the tune of $70 to $80 a barrel. Mr. Pandhe pointed out that many countries had renegotiated contracts with oil companies or imposed windfall taxes so that these “fortuitous gains” were passed on to society.

Mr. Pandhe said while private refineries were being allowed to retain margins exceeding $15 a barrel, the public sector oil companies were burdened with the responsibility of keeping kerosene, petrol, diesel and LPG prices in check.

Mr. Pandhe urged the Government to reduce import duties on crude oil which would lead to lower prices for consumers and help in taming inflation. The imposition of windfall tax, he pointed out, would compensate any loss the Government may incur by lowering import duties.

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