Oil exploration may get tax sops
In a bid to attract investments in oil and gas sectors, the government is considering a proposal to accord infrastructure status to exploration and production (E&P) activities, LNG gassification and gas pipeline projects.
By Rajeev Jayaswal, TNN |
NEW DELHI: In a bid to attract investments in oil and gas sectors, the government is considering a proposal to accord infrastructure status to exploration and production (E&P) activities, LNG gassification and gas pipeline projects.
Accordingly, these activities will be eligible for tax exemptions. The government is considering a proposal in this Budget (2006-07) to give infrastructure status to E&P business, LNG gassification, and petroleum products import facilities including SBM and pipelines for crude, gas and petroleum products, sources in the government said.
The status would be the same that is enjoyed by power and telecom sectors. “All incentives should be made available in terms of Section 10 (23G) and 80 IA of the Income Tax Act,” sources said. The government is also considering to allow capital goods imports for refinery sectors without any duty. About 92 MMT of new refining capacity is expected to be added in 2007-12.
Public sector oil firms alone plan to invest over Rs 85,000 crore in new refining capacities, sources said. New PSU refineries are proposed in Bathinda (by HPCL), Bina (BPCL) and Paradeep (IOC).
Customs duty on project imports for new refineries is likely to increase project cost significantly. Currently, basic customs duty on project import for new refinery is 5% plus 16% additional duty (countervailing duty) plus 2% education cess.
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Similar tax benefits will also be extended to those companies that intend to expand their existing refining capacities. While MRPL intends to expand its Mangalore refinery, HPCL has already started expanding production capacity of its Vizag refinery.In order to incentivise E&P activities in the country, it is likely that the lists of duty free import of equipment will be expanded. Department of revenue had already issued notifications listing names of equipment in 2002 (list 12 for petroleum operations and list 13 for coal bed methane operations).
“Lists are not comprehensive and do not contain all capital goods required for oil exploration and production. New capital goods required in E&P activities have been identified and it would be included in the amended lists,” a source in the government said.
rajeev.jayaswal@timesgroup.com
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