Sketchy road map on oil & gas.

Like previous Budgets, this one, too, did not address long-pending tax-related demands of the oil and gas sector.

There was no relaxation or extension of the tax benefit clauses, no exemption from service tax on exploration and production services, and no clarification that ‘mineral oil’ includes natural gas for tax holiday purposes. And similar to earlier instances , this Budget, too, had some big announcements for the sector which were high on generics but low on specifics. For instance, in keeping with the BJP election manifesto promise of developing a gas grid across the country, the Government plans to double the gas pipeline network from about 15,000 km currently. This is planned to be achieved through public-private partnership models, but details on funding and timelines are missing. There is no denying that a wider pipeline network is important to supply natural gas across the country, but first there is an urgent need for steps, including on the pricing front, to increase domestic production of this clean fuel. The existing pipeline network in the country is under-utilised for want natural gas. The Government's intention to accelerate production of coal bed methane (CBM), if it fructifies, may help increase domestic gas output. But here, too, the how and by when details are missing. Similarly, the plan to rapidly scale up the usage of piped natural gas (PNG) lacks details. If and when these Budget proposals fructify, beneficiaries could include CBM producers such as Essar Oil, gas transmitters GAIL (India) and GSPL, and city gas distributors such as Indraprastha Gas and Gujarat Gas.

While there was quite some mention on gas, the oil sector was conspicuous by its absence in the Budget documents. A clear road map on how the Government plans to incentivise production of crude oil, almost 80 per cent of which is currently imported, would have helped.


HBL