Thursday, May 26 2005 18:23 Hrs (IST) - World Time -

New Delhi: In a move that could hit refiners like Reliance Industries, Government may withdraw the export incentive duty drawback scheme for oil sector to absorb part of the steep fuel price hike required in face of surging global petroleum prices and increased incidence of duties.

At a meeting chaired by Prime Minister Manmohan Singh, Finance Minister P Chidambaram promised to consult Commerce and Industry Minister Kamal Nath to withdraw the scheme as a measure to reduce the Rs 2.87 per litre hike in petrol and Rs 3.73 a litre raise in diesel prices needed immediately.

The withdrawal of duty drawback, under which duties paid by exporters are reimbursed, would result in saving of about Rs 2,400 crore in the oil sector.

The Finance Ministry will then lower duties on oil products to the extent of the saving accruing from withdrawal of duty drawback.

Sources said Petroleum Minister Mani Shankar Aiyar told the meeting that public sector oil retailing firms had made a actual cash loss of Rs 1,424 crore in March and April due to the freeze on fuel prices.

Another meeting is scheduled for early next week after Petroleum Ministry reworks the hike in petrol, diesel, LPG and kerosene prices needed to avert the cash loss in keeping with the capital investment requirement.

Chidambaram told reporters that the "meeting remained inconclusive" and Petroleum Ministry had been asked to work on certain options. He refused to elaborate.

Reliance Industries exports 30 per cent of oil products produced from its 33 million tonnes refinery and is the biggest beneficiary of duty drawback scheme.