The Hindu Business Line : Infrastructure status sought for gas pipelines

Advertisement

New Delhi Feb. 23 Expectations are running high amidst the players looking at investing in gas pipeline projects from the forthcoming Budget.

The industry has pitched for extension of infrastructure status similar to other public utilities such as roads, airports, telecommunications and power.

If the Finance Ministry accedes to the request of these companies, it would not only benefit the power and fertiliser sectors, and reduce subsidy burden on the Government, but also weigh less on the domestic consumers pocket.

Fuelling the expectation is also the Finance Minister, Mr P. Chidambaram's, statement at a recent industry event that he would consider the Petroleum and Natural Gas Ministry's request of granting infrastructure status to pipeline projects in the country.

Vital sector

Industry sources told Business Line that the Government needs to encourage this vital sector by extending infrastructure status benefits under the Income-Tax Act, to make them eligible for tax holidays. Pipelines are said to be the most economical and safest means for natural gas transportation, requiring huge capital investments and have the potential of providing substantial employment both directly and indirectly.

Some of the players who are already into the business include State-owned GAIL (India) Ltd, Gujarat Gas, Indraprastha Gas Ltd, Mahanagar Gas Ltd and Adani. Waiting in the wings to tap the market of piped natural gas and compressed natural gas, are Reliance Industries Ltd, Reliance Energy and PSU oil marketing companies.

"Since the transportation tariff to be charged by such companies for gas transportation would be decided on the basis of fixed percentage of return on equity, any tax benefits provided under the Income-Tax Act (80-IA) would result in reduction of tariff to the consumers — industry as well as domestic," the sources said.

`Lower tariffs'

"The tax forgone by the Government in the form of tax holiday would actually be passed on to the ultimate consumers in the form of lower tariffs. While the accumulated benefits to the national exchequer is expected to be around Rs 20,000 crore per year, the tax forgone by extending this status would not be more than Rs 500 crore to Rs 750 crore per year," the sources added.

Natural gas

Industry sources said natural gas as a fuel, even at market prices ($5 to $6 per mmBtu) offers opportunity to substitute liquefied petroleum gas (LPG) for domestic consumption and liquid fuels used by the fertiliser industry and to eliminate the burden of these subsidies.

"The difference between the production cost and the sale price of urea is currently subsidised through retention price mechanism. On preliminary calculations, this will lead to savings in the fertiliser sector to the exchequer to the tune of Rs 7,500 crore per year," the sources said.

As regards usage of LPG in households, industry sources argue that substituting it by natural gas would result in reduction of subsidies on the product.

More Stories on : Petroleum | Infrastructure | Budget

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