The finance ministry is likely to continue giving a seven-year income-tax holiday on production of oil and gas. It had withdrawn the exemption in Budget 2008-09.
The continuation of the tax holiday will come as a relief to oil and gas companies, which have already invested huge money in exploration of hydrocarbons. It will also help the petroleum ministry, which has been promising the tax holiday while marketing the auction of oil and gas block under the New Exploration and Licensing Policy.
However, the same facility may not be given to new refineries starting operations after April 2009.
"Petroleum Minister Murli Deora met Finance Minister P Chidambaram yesterday. He was assured that the tax holiday would continue," said an official in the petroleum ministry.
The proposal to withdraw the income tax holiday had put in question the auction of oil and gas blocks under Nelp VII. However, Petroleum Secretary MS Srinivasan had said earlier this week that the auction would go on.
Investments worth over $3.5 billion are projected under Nelp VII.
Reliance Industries is spending close to $8.8 billion in developing its D6 block in the Krishna-Godavari basin in the east coast. The company plans to produce 80 million cubic metres gas per day from the block, which is equal to the current gas availability in the country.
Oil and Natural Gas Corporation Chairman and Managing Director RS Sharma had earlier said the withdrawal of the tax holiday would lead to heavy litigation.
