Natural Gas Storage, Distribution & Supply: Budget 2013-14 Analysis
The following announcements have been proposed in the Union budget 2013-14
No change in the peak rate of basic customs duty of 10% for non-agricultural products.
No change in the normal rate of excise duty of 12% and the normal rate of service tax of 12%
Surcharge increased from 5% to 10% on domestic companies whose taxable income exceeds Rs 10 crore. In the case of foreign companies, who pay the higher rate of corporate tax, the surcharge will increase from 2% to 5%. In all other cases such as dividend distribution tax or tax on distributed income, current surcharge increased from 5% to 10%. Additional surcharges will be in force for only one year i.e. FY’14
Education cess for all tax payers shall continue at 3%
Companies investing Rs 100 crore or more in plant and machinery during the period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance of 15% of the investment.
Concessional rate of tax of 15% on dividend received by an Indian company from its foreign subsidiary proposed to continue for one more year. Further, the Indian company shall not be liable to pay dividend distribution tax on the distribution to its shareholders of that portion of the income received from its foreign subsidiary.
Increase the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10% to 25%. However, the applicable rate will be the rate of tax stipulated in the DTAA (Double Tax Avoidance Agreements)
Work on draft GST Constitutional amendment bill and GST law expected to be taken forward. sum of Rs 9,000 crore is set apart in the budget towards the first instalment of the balance of CST compensation
A final withholding tax at the rate of 20% on profits distributed by unlisted companies to shareholders through buyback of shares
Industry Expectations – Not fulfilled
Expects the custom duty exemption to LNG/Natural Gas may be granted on imports made by any person subject to its 'end-use' for generation of power
Expects import duty exemption on LNG should be extended to all sectors & not just power, aligning it with crude petroleum
Expect custom duty on import of materials for laying the petroleum products and gas pipelines is made nil
Petroleum products including crude oil and natural gas to be covered under Goods and Services Tax
Expect custom duty on import of materials for laying petroleum product and gas pipeline be made nil.
Include Natural gas and LNG as declared goods on which sales tax of more than 5% cannot be levied in any state irrespective of where the product is sold.
No direct impact on Natural Gas Storage, Distribution & Supply. The 5 MMTPA LNG terminal in Dabhol, Maharashtra will be fully operational in 2013-14.
Stocks to watch
Reliance Industries, GAIL, Gujarat Gas, Indraprastha Gas, GSPL
Union Budget 2013-14 was neutral for the Natural Gas Storage, Distribution & Supply in absence of any announcement targeted at the sector. None of the demands of the industry were met.
There is a huge gap between demand and indigenous supply of gas, which is met through import of Liquefied Natural Gas (LNG). As far as domestic production is concerned, the supplies from KG basin have been declining in the last one-year and are expected to dip further.
Total overall demand of Natural gas is expected to reach 473 MMSCMD by FY'17 from 293 MMSCMD in FY'13. Over the 12th plan domestic availability is likely to grow at a CAGR of 11% from 124 MMSCMD to 209 MMSCMD by FY'17. LNG availability is likely to increase from 63 MMSCMD in FY'13 to 150 MMSCMD in FY'17 leading in increase in total availability of Natural gas from 187 MMSCMD in FY'13 to 359 MMSCMD in FY'17.