Railways eyes own refining capacity to save on diesel tax: report

The Railways, the largest consumer of diesel in the country, proposes to set up a captive oil refinery to save on fuel costs. The idea is to either set up a refinery and import crude for refining or block refining capacity, say reports.

The proposal, which is still in a nascent stage, has been mooted at a time when the global crude prices have fallen to record lows while the Railways continues to pay huge sums as taxes on its diesel bill.

''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,'' the Hindu BusinessLine quoted Hemant Kumar, member-mechanical, Railway Board, as saying.

However, Kumar said, much will depend on the future scenario, adding that the proposal will have to be discussed with the petroleum ministry first before being firmed up.

Railways, he said, would want a long-term view of the taxation regime before taking such a plunge. ''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,'' Kumar said.

At present, the Railways on an average pays 30 per cent of its fuel bill as taxes, which could amount to around Rs6,000 crore, considering an estimated fuel bill in the range of Rs17,000-18,000 crore for 2014-15.

The Railways consumes about 2.8 billion litres of diesel a year, and with the price of the Indian crude basket falling to $34.01 (Rs2,251.79) a barrel from $57.91 (Rs3,674.97) a year ago, it would help save about Rs4,000 crore in current fiscal alone, he added.