Industry & Economy
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Petroleum
Relief likely to prove spoilsport for some producers
Mr R.S. Sharma
Pratim Ranjan Bose
Virendra Pandit
Kolkata/Ahmedabad. July 6 The Budget announcement to retrospectively treat all blocks licenced under a single contract as a single undertaking for provision of the tax holiday on natural gas production, may prove to be a spoilsport for a host of producers who had claimed tax exemption for development of pre-NELP assets during the NELP regime beginning April 1, 1998.
The decision may result refund of tax benefits already enjoyed.
Among the producers are ONGC, British Gas and Reliance consortium for Panna-Mukta-Tapti field; Niko for Cambay operations, Cairn-led consortium for Ravva field; GSPC-Niko consortium for its Hazira field and so on. All have developed a sizable part of their pre-NELP assets, post April 1998. Available reports suggest that many have also enjoyed tax benefits for development of wells during the NELP regime.
IMPACT
“This decision will impact us as we have the largest share of such blocks,” the ONGC Chairman, Mr R.S. Sharma, told Business Line. ONGC was yet to calculate the quantum of the impact. Comments were not available from other producers.
Industry sources feel that today’s announcement may spoil GSPC’s prospect of winning the ongoing dispute over tax rebate on larger part of production Hazira gas field. The GSPC-led consortium, which is currently producing gas from its pre-NELP Hazira field, previously sought income-tax holiday for wells which were developed during the NELP regime i.e. after April 1, 1998.
According to the company out of the 22 productions wells in the field 21 were developed during the NELP regime.
According to sources, the company even secured a favourable verdict in this regard from the Gujarat State income-tax tribunal. The income-tax authorities are now believed to have appealed in a higher court contesting the verdict of the tribunal.
When contacted, a GSPC official admitted that the company has a pending dispute over the tax claim from its Hazira field. “We were not alone in seeking this benefit a host of other companies have sought this benefit and enjoyed it too. The decision, if at all, may affect many of us,” the official added.
GSPC, however, is overjoyed to the Finance Minister’s decision to re-introduce the tax-holiday for production from NELP fields as it would benefit the company’s existing E&P activity in a more prolific K-G basin block.
GSPC has recently submitted a $1.7-billion plan for development of KG-8 gas discovery in the western part of the K-G basin offshore exploratory asset KG-OSN-2001/3.
Meanwhile, sources in Reliance Industries said that today’s announcement removed all apprehensions about the tax holiday on D6 gas production.
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