Budget 2013 Impact: Cairn, RIL and Essar Oil unhappy on failure to address policy uncertainity

NEW DELHI: Top private energy firms such as Cairn India, Reliance Industries and Essar Oil have been let down by the Budget of finance minister P Chidambaram, as no concrete steps have been announced to stimulate investment after two years of policy uncertainty, industry officials said.

“In his Budget speech, the finance minister has clearly recognised the need for FDI in the country and the high forex outgo on energy. Still he fought shy of taking any measures that will energise the private capital participation in the upstream oil and gas sector, and create solutions,” Association of Oil and Gas Operators Secretary General Ashu Sagar said.

The association has over two-dozen members, including RIL, ONGC, Cairn, BP, BG and BHP. Explorers are disappointed the Budget did not address the confusion over the seven-year tax holiday, which is allowed if crude oil is discovered in a field but not if the operator finds natural gas, industry officials said. “From an overall perspective, Budget 2013 has a neg-ative bias for oil and gas industry,” said Nabin Ballodia, Partner-Tax, KPMG in India.

“The proposal to the move from profit-sharing model to revenue-sharing model marks substantial increase in risk profile for exploration and production companies,” he added.

PwC India Leader-Oil & Gas Deepak Mahurkar said: “Withdrawal of cost recovery mechanism exposes investors to more risks of investments, and that may dissuade large oil companies from India.”

But, former chief of ONGC, RS Sharma, said the proposed transition from profit sharing to revenue sharing would do away the “ambiguity” in the calculation of cost recovery and approval of capital expenditure incurred by exploration companies before sharing profit petroleum with the government.