Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004

Cross Currency

Group Sites

Industry & Economy - Budget

ONGC, GAIL to carry the can

Our Bureau

Budget 2004-05 has not been kind either to the oil companies or the consumers.

New Delhi , July 8

IN the absence of any tax sops for the petroleum sector in the Budget, the stage is set for the Petroleum Ministry to spill some of the LPG and kerosene subsidy burden into the backyard of upstream major Oil and Natural Gas Corporation (ONGC) and gas transporter Gail (India) Ltd. This year, the LPG and kerosene subsidy burden on the oil marketing companies is estimated to be in the region of Rs 9,000 crore (after accounting for the government subsidy), with little hope for any price revisions to mitigate the burden. Last year, a similar situation prevailed with the government directing ONGC and Gail to bear a significant portion of the Rs 8,200-crore subsidy bill.

Budget 2004-05 has not been kind either to the oil companies or the consumers. The government subsidy on LPG and kerosene has been pared to Rs 3,500 crore, belying expectations of a higher allocation. The oil companies, meanwhile, would have to fork out significant amounts in view of additional service tax as well as the newly constituted education cess.

Indian Oil Corporation alone would be required to pay out around Rs 450 crore this fiscal towards the education cess. Oil and Natural Gas Corporation (ONGC) has been burdened to the extent of an additional Rs 400 crore, owing to the additional service tax incidence (Rs 250 crore) as well as the education cess. ONGC has one of the largest volumes of service contracts, especially in the exploration business such as hiring of rigs, platforms.

The Finance Ministry has once again ruled out implementation of the Rs 1,570-crore scheme for compensating refineries on taxes levied by state governments but are not recovered from the consumer during the current fiscal. This, despite the fact that the last Budget had provided this amount under "irrecoverable taxes."

In Thursday's Budget announcements, the revised estimate for irrecoverable taxes during fiscal 2003-04 is a mere Rs 220 crore, which relates to payments during fiscal 2002-03. Further, for fiscal 2004-05, there is no allocation for payment of irrecoverable tax. Under the scheme, which was operational in 2002-03, Indian Oil Corporation and other public sector marketing companies paid Reliance Industries Ltd around Rs 470 crore. The other major beneficiary was Kochi Refineries Ltd, which got around Rs 200 crore.

Reliance was paid this sum towards the Central Sales Tax (CST) levied by the Gujarat Government on the petro-products sold by its Jamnagar refinery to the public sector oil marketing companies outside the State and not recovered from the consumer.

More Stories on : Budget | Petroleum

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
More bank finance for stock brokers

`Budget is not inflationary' — Transaction tax no impediment to stock market activities
Chidambaram plays the popular tune — Tax breaks for farm sector and lower middle class
Thumbs down by markets
Service tax on transport intermediaries hailed
Adopting the Keynesian route
FDI push on telecom
Shipping industry says `ahoy!'
Mutual funds — Odds stacked against debt funds
Tonnage tax at last for a smooth sailing
Focus on rural housing; tax rebates to stay
Banking on industrial growth
IIG to beef up infrastructure
ONGC, GAIL to carry the can
A rural slant
Power on `line
Govt to facilitate crop diversification
A bitter pill, says pharma sector
Chaos after the wait
At your service, tax!
A progressive budget
Striking a balance
Spurring investments
Continuance of economic reforms
Catch My Point!
Mixed response from India Inc
Move to drop Cenvat may pep up yarn market
'Market pessimism to end soon'
Steps initiated to integrate stock, commodity markets
FDI in aviation capped at 49% — Buying of aircraft to attract tax
Toyota to set up R&D centre in India
0.15 per cent tax to be levied on securities transactions
SPV for Sethusamudram canal project
Insurance FDI limit raised to 49 pc
IDBI gets Rs 9,000 cr to turn zero NPA
In coalition company
Captains of industry give Budget proposals a cautious welcome
Shifting gears
Turnover tax may spook capital gains
RBI sees no Budget trigger for change in rate, inflation outlook
Views from the bottom of a coffee cup
Customs duty cut on metals: Major price impact unlikely
Coop sugar sector needs tax holiday
Water bodies renovation innovative
Transaction tax a dampener: FISE
Modest hike in Central Plan outlays in real terms
Nothing much to glow about
Smooth ride for tractors
No excise duty on dairy machinery
The jam in the Budget
Disinvestment, reborn
Disappointing delivery
Little to build on
Right thrust on crop diversification
Oil and gas — Slickly left alone
3 key areas targeted for 24.6% revenue mop-up
Industry divided on price drop
A taxing scenario for media
Personal finance: Thrust to direct equity investing
A cess to educate
`Back-to-basics' theme
A `neutral-to-negative' exercise: MFs
A mixed bag
Little more buoyant now
Prices static? Not for long
FDI limit hike has insurers smiling — Service tax on risk premium for life cover is a dampener
`More clarity on turnover tax needed'
Sewing up the competition
A lot to cheer about
Turnover tax seen as a blip
Rural sops to get FMCGs going
May impact trading volume: market players
`VAT by 2005, a step in right direction'
Your dream car to become dearer
A limited first step
Consolidation vital
Slip into khadi and morph into a geek
Hindujas interested in desalination project proposal
Budget fails to impress CETMA
`Bold decisions taken on foreign investments'
No impact on gold market; platinum prices may fall
FIPB to fly with clipped wings
Cap for SSI loans raised to Rs 1 cr
A bitter-sweet pill for vegoil sector
Assurance to States on VAT compensation
Service tax hiked to 10 pc; list expanded
An effort to reflect mandate for change
New deal for farmers; more funds for States
Stress on moderation, stability in tax rates
Textiles woven in style
More services annexed at a higher rate
VAT full of promises
Watch out as the government shifts gears and piggybacks
No luck if you cross a `lakh'
Tax admin: Reforms kept in arrears
`No clear theme in the Budget' — Mr Yashwant Sinha, former Finance Minister

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line