NEW DELHI: The county’s oil and gas industry has sought supportive regulatory reforms to compensate for losses incurred by downstream companies on the sale of auto fuels, and reducing the cess on crude oil production.
“The oil marketing companies’ expect an adequate budgetary provision to compensate for losses incurred on the sale of auto fuels and sensitive products -LPG and kerosene,” said Prashant Vasisht, Senior Vice President & Co-Group Head – Corporate Ratings, ICRA.
The upstream industry has also been demanding a downward revision in the cess on crude oil production and the exemption of exploration and development activities, cost petroleum, profit petroleum and royalty from the levy of GST, he said.
While the government’s recent initiatives like the Open Acreage Licensing Programme, Discovered Small Field, and Production Enhancement Contracts have enhanced collaboration between the public and private companies for increasing production of oil and gas, the industry expects more such initiatives to provide a big boost to the industry.
The energy sector also hopes to see streamlining of gas pricing formulas to optimize gas marketing alongside the inclusion of hydrocarbon products under the ambit of GST. However, any final decision on GST is decided by the Centre-State GST Council.
“The industry is looking forward to the Oilfield Amendment Bill, already passed in Rajya Sabha, being passed in Lok Sabha as well during the Budget session of Parliament. The changes proposed in the bill will greatly enhance ease of doing business by streamlining regulatory clearances and arbitration processes, and the biggest benefits will be seen in unconventional hydrocarbons like shale oil and coalbed methane,” said Kapil Garg, Chairman & Managing Director, Oilmax Energy Private Ltd.
In addition, the midstream industry wants the customs duty of 2.5% on liquified natural gas (LNG) imports to be scrapped, which would promote the use of natural gas as a fuel. “The GST on regasification of LNG remains high, at 18% and there is a request from industry to the Government to reduce the GST rates,” Vasisht said.
Raju Kumar, Partner and Energy Tax Leader at EY India highlighted that GST reforms, including reducing GST on hydrogen, bringing natural gas under the GST framework, and ensuring uniform rates for renewable energy equipment, will simplify tax structures and lower project costs.
Policy measures to bolster domestic oil and gas exploration and green hydrogen infrastructure can further enhance energy security and sustainability, Kumar said.
Oil minister Hardeep Singh Puri had said that the focus of the new alliance government would be on boosting oil and gas exploration and production, green hydrogen, and increasing the consumption of gas in the country to achieve a gas-based economy.
“With a potential decline in oil production by 2030, increasing investment in oil exploration is essential. This will not only build confidence among domestic players to venture beyond shallow waters and into deep-sea exploration but also ensure sustained growth in capacity,” Garg had said. “Continued capital expenditure (CAPEX) investment is necessary, particularly in energy, logistics, and infrastructure, including gas pipelines and railway corridors.”
The government has been emphasizing on making the country a gas-based economy while taking several initiatives to increase the share of gas in the energy mix in the recent few years. Stakeholders see the trend continuing with more emphasis given on domestic PNG (piped natural gas) connection.
Budget 2024 may also focus on energy transition practices by the public sector oil and gas companies as the country moves towards attaining net-zero by 2070.
Source: The Financial Express