Demand Draft

New Delhi, May 13: Brunei has demanded that India should slash the customs duty on crude oil as part of the free trade agreement the country is negotiating with the Association of South East Asian Nations.

Brunei’s demand must have touched a chord with petroleum minister Murli Deora and state-run oil companies, which import crude oil and have been seeking a reduction in the duty.

At present, the import duty on crude oil is 5 per cent.

Deora has long been arguing that this should be scrapped to help state-run oil companies who have been selling petroleum products at prices below their cost.

Petroleum ministry claims that the companies can face a huge loss of Rs 130,000 crore this financial year by selling petrol and diesel below cost.

Brunei, which sells about 2 million tonnes of crude to India annually, says the slashing of duties will help it sell more oil to India, which it considers as one of its key markets for the future.

Brunei trade negotiators say most of its crude sales to countries such as the US, Japan and Korea are at zero or minimal duty. India is one of the exceptions and taxes crude at higher levels.

Officials say that India is planning to cut the duty on Brunei crude to 3 per cent by July this year and follow it up by cuts of one per cent every year till the duty becomes nil.

The finance ministry has agreed to this formula as India imports only about 1 per cent of its crude requirements from Brunei and the concession on this account will be minimal.

Since India is keen to sign free trade agreements with the Gulf Co-operation Council, analysts feel, the country may have to agree to similar terms with other countries.

Once that happens, Indian consumers, or at least oil refining and marketing companies, could stand to gain.