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LNG sector seeks relief-I: Elimination of secret comparables in LNG prices and lower customs duty sought
Dec 04: 8Gas producers are protesting the use of secret comparables in the pricing of LNG.
-- Since the determination of LNG pricing is highly complex, due to international price changes, varying cost of intermediary logistic services etc, secret comparables obtained from corporates are usually far from accurate and hence should not be applied for the determination of arm’s length price of LNG, the industry is claiming.
-- Allowing use of secret comparables for non-commodities leads to a high number of disputes and unwarranted litigation.
-- It is argued that developed countries, such as the US & UK have an official policy of not using secret comparables for any Arm’s Length Principle (ALP) evaluation.
 8Then again, it is argued that since LNG falls into the same logical category as crude oil, it must have the same level of taxation as applied to crude il. The benefits of using LNG are far-reaching vis-a-vis the revenue loss to the exchequer.
-- International LNG prices are at least 20-25% lower than the crude oil (or petroleum fuels) on heat equivalent basis and thus go to reduce the cost of energy to end-consumer in addition to the forex saving, the argument goes.
-- Since customs duty on crude oil has already been made zero, import of LNG presently attracting 5% customs duty should also be exempt. Through Finance Act 2012, the government has exempted levy of Customs duty on import of LNG for power sector. However, this exemption should be extended to other sectors also.
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