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Archana Chaudhary

Mumbai , Nov. 23

ONGC Ltd has asked the Union Government to grant it "infrastructure status" for its exploration and production (E&P) business.

The company, which has lined up upstream investments of Rs 16,200 crore in this fiscal alone, will benefit from a seven-year tax holiday on revenues from its E&P business if the Government agrees.

"Exploration and production is a core infrastructure activity. It is very alike other core projects such as roads, bridges, etc. We have asked the Ministry to consider this," Mr R.S. Sharma, Director (Finance), told Business Line.

Raising funds at concessional rates and a seven-year tax holiday under Section 85 (a) would most certainly mean more funds at the company's disposal for its ambitious growth plans.

It has won 15 blocks under the fourth round of New Exploration and Licensing Policy, is redeveloping its biggest asset Mumbai High, and is aggressively pursuing equity oil abroad.

This year ONGC plans to spend Rs 5,700 crore on oil exploration, production and development drilling within the country. It has also earmarked Rs 6,200 crore for overseas investments.

"ONGC invests large sums on exploration of wells and development of oil fields. This may take 2-5 years. The company has to pay tax only after the field starts producing oil or gas. And these fields typically produce efficiently only within a limited time window of 20-30 years at the most. It takes longer to recover investments," a senior oil industry analyst said.

This is not the first time that ONGC has put forth this proposal. "We have been asking the Government to grant infrastructure status to our E&P business for two years now. We are trying yet again," Mr Sharma said.

According to a senior analyst with a foreign bank, a Government nod could open a Pandora's box.

"There could be similar requests from other players in the Indian upstream sector involving big private corporates and foreign companies. The Government would be hard pressed to ignore similar proposals."

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