Oil & Gas industry seeks extension of incentives and rationalisation of duties in Budget 2018

The oil and gas industry has sought further extension of incentives given for exploration and production (E&P) blocks till 2022, and demanded inclusion of crude oil, natural gas, petrol and diesel under GST regime as exclusion restricts oil marketing companies to take benefit of input credit. They have also asked for an infrastructure status for the industry. Read More

Vilas Tawde, Director & CEO - ‎Essar Oil and Gas, Exploration and Production Ltd said, the 7 years tax holiday under section 80IB (9) is available to blocks assigned in NELP-VIII and CBM round IV. However it was earlier available to all the blocks under NELP and CBM auctions.

"Our recommendation is, it should be clarified that the benefit of tax holiday would be available on the gas produced from all the blocks awarded under NELP/CBM or in any other manner by central or state governments, as it was available earlier."

The section 80IB (9) further states that the benefit is available to the commencement of commercial production of mineral oil not later than March 31, 2017. "We recommend to extend this date to March 31, 2022 to provide incentives for the exploration and production of CBM gas and also to be in consonance with the Government’s policy for early monetization of CBM gas and the Prime Minister’s vision to bring down its import dependence on oil and gas by 10% per cent by the year 2022," Tawde said.

Sudhir Mathur, CEO of Vedanta Cairn Oil and Gas, said, with the international oil prices breaching the $70 barrier, and India importing 80% of its oil, the big challenge for Finance Minister Arun Jaitley while presenting the Union Budget 2018-19 will be to keep the fiscal deficit under control.

"The import bill for 2018 is estimated at Rs 5 lakh crore and any further rise in crude prices would necessitate tough fiscal measures," Mathur said.

Mathur concurred with Tawde, that, it is the need of the hour to give a boost to domestic oil and gas production, to push the Prime Minister Narendra Modi's vision of reducing dependency on imports by 10 per cent by 2022.

The oil and gas industry has further sought an infrastructure status for the exploration and production sector in addition to lowering of taxes on locally produced oil to boost domestic output and cut import dependence.

The industry also wants inclusion of natural gas in the Goods and Services Tax (GST) regime at the earliest to boost the use of environment friendly fuel and help transition to a gas-based economy

Prashant Modi Managing Director and CEO of Great Eastern Energy Corp Ltd (GEECL) said a long standing demand of the oil and gas industry has been the grant of infrastructure status to the E&P sector in order to boost exploration activity in the country. This will raise domestic production of oil and gas and help bring down the import bill.

Natural gas, he said, continues to stay outside the ambit of the GST, posing biggest challenge to the sector. "Being an environmental friendly fuel and currently being taxed reasonably by various states, it should be brought under the GST regime at the earliest," Modi said.

GST, which subsumed more than a dozen central and state levies like excise duty, service tax and VAT into one tax, was rolled out from July 1 last year. But crude oil, natural gas, petrol, diesel and jet fuel (ATF) had been kept out of its purview for now.

"The Budget is an opportunity for the government to introduce much-needed reforms that will encourage existing players to invest more, and attract new foreign investments to effectively tap the country's energy potential. Jaitley should cut the cess on domestic production from 20 per cent of the price realised to 8 per cent," Mathur of Vedanta Cairn said.

- TradeBriefs Bureau -