The government promised on Friday to remove distortions in excise duty on branded and packed refined oils, which analysts said allowed companies to avoid the levy.

"Certain distortions have been observed in the operation of the scheme," Jaswant Singh told Parliament while moving the Finance Bill for consideration. "These will be rectified and I will inform the house at the time of the passage of the Finance Bill."

Singh told Parliament while presenting the federal budget for 2003-04 (April-March) in February that the government has imposed a "value-added" excise duty of eight per cent on packed and sealed containers of refined oils and vanaspati, or hydrogenated oil, for retail sale.

Traders had said the imposition of excise duty had opened an avenue for manufacturers not to use their brand name and thereby avoid paying excise duty.

They said the levy of excise duty had also encouraged the sale of refined oils and vanaspati in loose form.

"Bulk consumers did not have to bear the burden of excise duty while household consumers who normally bought in retail packs had to bear the burden," said one commodity analyst.

Local oil prices have surged about 35 per cent in the past 12 months due to a fall in domestic oilseed production and firm global prices.

India, the world's largest edible oil buyer, imports about 4.5 million tonne of edible oils every year, almost half of what it consumes. Of this, palm oil accounts for nearly 3 million tonne.

It buys palm oils mainly from Malaysia and Indonesia and soy oil from Argentina and Brazil.