‘More clarity needed on oil imports’ | SupportBiz

Policy Notes

‘More clarity needed on oil imports’

SupportBiz attempts to explore the views of stakeholders from the oil and gas industry on the Union Budget 2013-14.

Expressing his views on the Union Budget 2013-14, Seshagiri Rao, Joint Managing Director,  JSW Steel states, “This budget, with the limited availability of fiscal space, attempts  to bring fiscal consolidation, with a lower fiscal deficit of 4.8% and simultaneous  higher allocations to various schemes to spur investments.  Announcing a 15% incentive for the acquisition and installation of new plant and machinery by manufacturing companies during the period beginning from April 1,  2013,  to March 31,  2015, is a welcome step to boost the investment. The higher allocation of 29.4% towards plan expenditure and increased outlays for social infrastructure, education, rural development, health and urban development are also expected to stimulate economic activity.”

However, Sheshagiri also  expresses concern over the budget, “As most  projects are stalled due to regulatory and bureaucratic delays,   budgets fail to meet the expectations that they raise.  The need to ease the process of clearances is not met, since the effectiveness of  the Cabinet Committee  on Investment is yet to be  established.  It is a matter of concern that  total  non-plan revenue expenditure, particularly interest payment and subsidy, remains at elevated levels. It is also challenging to achieve an increase of 19% in tax revenues when the economy is slowing down and there are no immediate signs of recovery. However, lower fiscal deficit, the announcement of introduction of DTC bill in this budget session, and possible GST rollout are encouraging take-outs from this budget.”

LK Gupta, MD and CEO, Essar Oil, is of  the opinion that this budget has been presented  keeping in mind the forthcoming general elections in the country.  However,  he welcomes  certain steps which the Finance Minister has announced  in the budget. Gupta says, “The re-introduction of investment allowance for investments in plant and machinery of over Rs. 100  crore will encourage new investments, and is a step in the right direction. The Finance Minister has shown his serious intent  to implement  GST by earmarking a sum of Rs. 9,000  crore for compensation to the state governments for the revenue loss on account of CST. We welcome this move, as  it is expected to herald a more predictable and uniform tax structure across the country.”

Commenting on the issues of the oil and gas sector, Gupta  says, “We are happy to see the government re-emphasise the need for a natural gas pricing policy. We eagerly await more clarity on this, as well as on the shale gas policy.  We believe that India, which imports about 80% of its oil and gas needs, cannot wait any longer to develop its own natural resources and use them towards meeting its energy requirements.  We were hopeful that the Finance Minister will  view our request for removing service tax on service providers to E&P companies favourably, since that drains away a substantial part of the funds committed for exploration.”

Most of the industry experts believe that this  budget has been largely neutral. There is a marked absence of any specific announcement targeted at the oil and gas sector, which is amongst the largest contributors in terms of direct taxes as well as forex  for the country.

“We are disappointed that the Finance Minister has not removed the tax anomaly between branded and unbranded fuel, given that  branded fuel has  been proved to increase engine efficiency and enhance  its life, thereby reducing consumption,”  says Gupta.

“Although there is still a long way to go before the entire nation is mapped, once fully implemented, this will allow the government to continue its welfare schemes for the needy, and yet control its subsidy bill by eliminating wastage,” he says.

Industry experts also believe that the ultimate de-regulation of the petroleum sector will lead to increased competition, thereby benefiting the consumers in the long run, in terms of improved service and competitive prices.