Budget Speech - PART A
Oil and Gas
- The country's demand for petroleum products is growing at over 8% per annum, which is faster than the growth of domestic supply. We cannot choke this growth. At the same time, we must reduce our dependence on imported petroleum products. There is no real alternative to increasing the supply. Just 6 of the 26 basins that have potential for oil and gas in India have been explored, and that too only partially. The Minister of State for Petroleum and Natural Gas will be making a detailed statement on the new exploration licensing policy (NELP) shortly. The highlights of the policy are the following:
- Companies, including ONGC and OIL, will be paid the international price of oil for new discoveries made under the NELP;
- Royalty payments will be fixed on an ad valorem basis instead of the present system of specific rates;
- Royalty payments for exploration in deep waters will be charged at half the rate for offshore areas for the first seven years after commencement of commercial production;
- Freedom for marketing crude oil and gas in the domestic market;
- Tax holiday for seven years after commencement of commercial production for blocks in the North-East region;
- ONGC and OIL will get the same duty concessions on import of capital goods under the NELP as private production sharing contracts;
- Cess levied under the Oil Industry Development Act, 1974 will be abolished for the new exploration blocks; and
- A separate petroleum tax code will be put in place as in other countries to facilitate new investments.
It is my fervent hope that Indian and foreign companies will respond positively to this package of measures.
- In order to ensure that adequate domestic refining capacity is created, I propose to allow refineries to import capital goods during the Ninth Plan period at a concessional duty on par with the fertiliser sector. Domestic capital goods suppliers will also get deemed export status.
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