Oil & gas industry seeks infra status, lower taxes in Budget

Natural gas, continues to stay outside the ambit of the GST, posing biggest challenge to the sector. Image source: Reuters

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

It 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.

Vedanta Cairn Oil and Gas CEO Sudhir Mathur said that with the international oil prices breaching the USD 70 barrier, and India importing 80 per cent 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," he said in his budget wish-list.

The need of the hour, he said, is to give a boost to domestic oil and gas production, pushing the agenda to fulfil Prime Minister Narendra Modi's vision of reducing dependency on imports by 10 per cent by 2022.

"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," he said.

Jaitley should cut the cess on domestic production from 20 per cent of the price realised to 8 per cent, he said.

Great Eastern Energy Corp Ltd (GEECL) Managing Director & CEO Prashant Modi 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," he 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.

Mathur said the government has to clarify non- applicability of GST on royalty paid on crude oil and natural gas produced locally as also on cash calls made for an exploration and production (E&P) project.

"The rollout of GST, and the exclusion of petroleum sector from its purview, has translated into much higher costs for the sector, defeating the objective of cost neutrality," he said.

Also, there is a need to bring price parity between domestic crude and imports by cutting the 2 per cent central sales tax on local production, to further enhance the country's energy security, he said.

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