Railways mulls own Oil Refinery to save on Taxes

Railways mulls own Oil Refinery to save on Taxes

New Delhi: At a time when global crude oil prices have plunged, resulting in an estimated $44 billion windfall for the Modi government this year (according to the PPAC), the Indian Railways, the country’s largest consumer of diesel, seems left out.

Prices have consistently fallen for the Indian crude oil basket, from $59.07 per barrel in April this year to $42.40 in November and further down to $33.35 per barrel on 29 December. But the pass-through has not happened for the Indian Railways that consumes about 2.8 billion litres of diesel annually, because 30% of the public transporter’s fuel bill comprises taxes levied by state governments.

So, the department is now thinking of having its own refinery, import crude on its own and refine it for captive use, or block refining capacity at any of the existing refineries in India.

“We would like the Railways to benefit from the low crude oil prices. We are considering options such as having a refinery or booking refinery capacity from which the high speed diesel is consumed by us, with the remaining products being used for other purposes,” said Hemant Kumar, Member-Mechanical, Railway Board.

But it would depend on whether the GST Bill includes petroleum products and the rate of taxation.

“What are the long-term taxes? What happens if the GST regime were to be implemented? We have to take these into account before finalising the issue,” said Kumar.

The department embarked on an exercise to save diesel consumption and thereby cut costs.

In a presentation recently, Railway Minister Suresh Prabhu said that among many initiatives, all new diesel locomotives are being fitted with auxillary plants to save about Rs 20 lakh per locomotive per year.

Besides, Indian Railways has also been procuring power through open access, resulting in Rs 70 crore savings between April and August, 2015 in a procurement of 50 MW of power in the NCR.

The department earned about Rs 78,951 crore during the first six months of the current financial year, up 8.96% from Rs 73,140 crore during the corresponding period last year; 67% of its earnings came from freight, while passengers contributed 28% to the revenues.

A higher thrust on safety and security at railway establishments resulted in 17.76 lakh people being prosecuted and a fine of Rs 49.94 crore collected from them during April to September, 2015.