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The Ministry of Petroleum and Natural Gas has asked the Ministry of Finance to consider a reduction in the cess levied on hydrocarbon exploration and production companies for producing crude oil.
This was stated by Dharmendra Pradhan, Minister of State (Independent Charge) for Petroleum and Natural Gas, at a seminar organised by industry chamber Assocham.
“The Government had changed the method of cess calculation to an ad-valorem basis in the Budget…However, in-principle I do agree with the industry that the cess should be in accordance with the dynamics of the market. Therefore, I have recommended to the Finance Ministry for looking into the demand of the industry in this regard,” said Pradhan.
Earlier at the event, DK Sarraf, Chairman and Managing Director of ONGC said, “Cess is still high. We are hopeful that the amount of cess comes down. It was made ad-valorem but the percentage is still to high and I would like the government to consider a reduction.”
From a fixed amount of ₹4,500 a tonne, which translated to around $9 a barrel in February 2016, the government had changed the cess calculation to 20 per cent on an ad-valorem basis. At the time, the cess was working out to be $6 a barrel.
The Oil Industry (Development) Act provides for a cess as duty of excise on indigenous crude oil. This is a production cess, and has to be borne by the producers as it is not a pass through.
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