Companies into hydrocarbon exploration and production business have asked the Government to remove uncertainties over tax and marketing regime before the ninth round of bidding for oil and gas areas is launched later this year.
“The ninth round of bidding (New Exploration Licensing Policy -IX) will be launched under the existing tax regime, but by the time the production sharing contracts (PSCs) will be inked, the country is likely to shift to a Direct Taxes Code (DTC) regime,” an official told reporters.
“There are uncertainties over which tax regime will be applicable,” the official added. Besides, under the DTC regime, the seven-year tax holiday for production of oil and gas which the industry currently enjoys is proposed to be removed.
“Though the Direct Taxes Code regime proposes to remove the earlier anomaly of treating oil and gas separately for taxation purposes, doing away with the tax holiday will prove a disincentive for the sector which involves high financial risks,” an industry source said.
Tax benefits
According to the industry, tax benefits for oil and gas exploration blocks should be clearly mentioned in the production sharing contract.
“Concerns have been raised by operators that under the given circumstances what kind of fiscal benefits will the exploration and production sector enjoy is not known. It makes it difficult for the operators to work out their fiscal packages while bidding,” an industry official said.
Companies in the sector also sought more clarity on Gas Utilisation Policy. “The Utilisation Policy should be consistent with concepts of free marketing. Interferences like continuous tweaking of the policy by the Government should be avoided. The policy should be announced prior to closing of NELP bidding. If need be, there should be a separate policy for free product markets,” industry official said.
NELP-IX
The Petroleum Ministry is looking at end-September to launch NELP-IX and on offer will be 35-40 blocks. To get the feel of the industry, the Directorate-General of Hydrocarbons recently held the investors’ meet. Submissions were made by The Association of Oil and Gas Operators.
The companies in the sector include ONGC, Oil India, Indian Oil Corporation, Adani, Santos, Cairn, BG Exploration and Production India, BP India, Niko, and Reliance Industries.
