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Will petro products finally come under GST?

May 27, 2019 15:10 IST

The new government may also introduce a separate scheme for revival of  stranded gas-based  power projects.

Illustration: Uttam Ghosh/Rediff.com

Further push for inclusion of key petroleum products under the ambit of goods and services tax (GST), and easing of exploration and production (E&P) norms will be among top priorities for the new government.

A source added that a separate scheme might also be introduced for revival of stranded gas-based power projects.

 

At present, five petroleum products - petrol, diesel, crude oil, natural gas and aviation turbine fuel (ATF) - are out of GST.

Sources said the immediate agenda would be to convince states like West Bengal, Bihar and Tamil Nadu that are not on board for inclusion of these products under GST.

With domestic oil and gas production declining, focus will also be given on further incentivising E&P segment, with additional emphasis on deep water and ultra-deep water areas, a government source indicated.

“A lot of work was done including the launch of open acreage licensing policy (OALP) and discovered small field (DSF) rounds.

"Now, the focus should be on arresting the decline in domestic crude production,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu in India.

Since 2014-15, crude oil production has declined by 4.7 per cent and natural gas by 2.9 per cent, despite the consumption increasing at a healthy rate annually.

With the OALP blocks and new gas discoveries coming on stream, production in India is expected to increase.

“Main advantage of OALP over NELP is that of no-cess levy, reduced royalty rates, marketing freedom for gas and a revenue-sharing model.

"We are happy with the incentives that the government has given. It is a big boost for OIL and ONGC.

"However, enhanced oil recovery (EoR) policy needs further review,” said Utpal Bora, chairman and managing director of Oil India.

According to an internal estimate by the ministry of petroleum and natural gas, crude oil production in the country is set to increase by 10 per cent from 34.75 million tonne (mt) in 2018-19 to 38.34 mt in 2021-22.

Similarly, natural gas production is expected to double to 71.92 billion cubic meter by 2021-22, from a mere 35.07 bcm now.

“Most of the companies showing interest in OALP are domestic and, hence, the government should also consider giving the industry some incentives.

"Moreover, E&P norms can be eased. A GST Council like body may also be considered with participation from the states to make the sector more investor friendly,” said P Elango, managing director, Hindustan Oil Exploration Company.

The new government might also take forward its plans to increase the share of gas in energy mix to 15 per cent from the current 6 per cent.

According to estimates, even imported liquefied natural gas is 40 per cent cheaper than imported crude oil.

Shine Jacob & Arup Roychoudhury in New Delhi
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