New Delhi, Nov. 9: The petroleum ministry has told the Rangarajan Committee on long-term petroleum pricing policy that it is required to rationalise the system of ad valorem duties as it increases the burden on both consumers and oil companies.

At its first meeting held today, the committee was briefed on the various taxes imposed on petroleum products.

The ministry is reported to have highlighted the fact that the system of ad valorem duties needs to be rationalised as it puts more burden on companies as well as customers when crude prices go up.

The high-powered committee, which has been appointed to formulate a long-term pricing policy for petroleum products, is expected to submit its report within six months.

Headed by C. Rangarajan, chairman of the Prime Minister’s economic advisory council, the committee includes petroleum secretary S.C. Tripathi, Planning Commission member Kirit Parikh and finance ministry chief economic adviser Ashok Lahiri.

It will look into the various aspects of pricing and taxation of petroleum products with a view to stabilising the prices. It will also consider the financial position of oil companies and the need to conserve petroleum products.

The taxation issue has been a bone of contention between the petroleum and finance ministries.

The petroleum ministry feels that ad valorem taxes should be scaled down when international prices of crude and petroleum products rise as it increases the burden on consumers.

However, the finance ministry has stonewalled this proposal as petroleum products are an important source of income for the national exchequer.

The committee will examine whether it is possible to devise a more rational tax structure.

It is expected to consider the interests of all stakeholders ? consumers, oil companies and the government ? and put in place a comprehensive mechanism for pricing and taxation of sensitive petroleum products.

“At present any change in prices has to be referred to the highest level of the government. Once the new mechanism comes into place, oil companies will be able to change prices according to global variations based on the formula devised by the committee,” said a senior official.

Petrol price

The Centre today ruled out any revision in oil prices for the time being. However, there could be a reassessment if crude prices drop below $50 per barrel, said Tripathi.