Union Petroleum Minister Dharmendra Pradhan has asked Ministry of Finance to cut cess on domestically produced crude oil to 10-12 percent from present 20 percent in order to provide relief to producers hit by fall in prices.
After some oil producers urged for reduction in cess, the ministry had written to Finance Ministry to review the rate to 10-12 percent ad-valoren or instead consider introducing of a graded system of cess rate.
"It should be according to market dynamics. I am recommending to Ministry of Finance to look into expectations of E&P sector," he said.
In the last budget, Finance Minister Arun Jaitley had moved from a fixed Rs 4,500 per ton cess on domestically produced crude oil to a percentage of oil prices or ad valorem rate of 20 percent, a step which was supposed to give relief to upstream firms.
At crude oil price of $45 per barrel, the old rate of Rs 4,500 per ton and the new ad valorem rate even out and if oil prices are to go up, companies will have to pay more.
"I am hopeful the Finance Ministry will favourably consider this," Pradhan said.