GST on fuel, easier licensing rules the needed energy bars : 24-05-2019

Bringing key petroleum products in the ambit of the Goods and Services Tax, easing licensing needs and taxation for upstream projects, enhancing third-party access to gas pipelines and helping in faster execution of city gas projects to stimulate gas demand in the country would be some of the key measures the new government may want to consider to energise the hydrocarbon sector.

At the top of the industry wishlist is the inclusion of petrol, diesel, aviation fuel, crude oil and natural gasNSE -1.81 % into the ambit of Goods & Services Tax. “I will definitely be happy if GST Council and the government consider this reform,” HPCL chairman MK Surana said.

“We don’t get input tax credit as companies in other sectors do. So that’s definitely a loss to that that extent,” he said.

HPCL lost about Rs 400 crore on this count in 2018-19. Oil companies together lose thousands of crores of rupees every year due to this. Including petrol and diesel in GST would face stiff resistance from states as they depend heavily on fuel taxes.

In the past five years, the government undertook many reforms in the exploration and production sector, which are yet to translate into big interest from the private and foreign players. The government freed up gas prices for new discoveries, gave companies the liberty to carve out their own blocks, offered them a single license to extract all forms of hydrocarbons, and placed more emphasis on work programme in selecting licensee for exploration blocks.

The new government will need to take more steps to reap the full advantage of the reforms undertaken in the previous years, industry executives said, adding that easing licensing requirements can help quicken the pace of upstream projects.

“The next steps for the new government must be to extend marketing freedom to current commercially producing fields under Nomination and pre-NELP contracts as well and alleviate double taxation via royalty and cess, which results in higher costs and lower investible surplus,” said Ajay Kumar Dixit, the chief executive of Vedanta’s oil and gas arm.

The government may want to pick up some of the unfinished tasks of the past five years such as enhancing third-party access to gas pipelines, building a gas grid and a trading platform, key measures needed to turn India into a gas-based economy, executives said .

Many foreign and private firms have been demanding separation of control of gas marketing and transportation entities to ensure a level playing field for all gas marketers wanting to use pipelines that’s today overwhelmingly controlled by state-run entities. A trading platform can also help vitalise the domestic gas market, executives said, warning that this would first require reforming the fuel allocation policy.

Natural gas consumption rose barely 1.5% in 2018-19 despite government’s effort to drive up demand due to inadequate infrastructure and higher prices of imported gas .

Source : PTI

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