Richa Mishra

New Delhi, Dec. 12

THE exploration and production companies in the hydrocarbon sectors have urged the Finance Ministry to consider extending fiscal concessions for the gas produced under the New Exploration Licensing Policy (NELP) in line with exemptions proposed for liquefied natural gas being imported into the country.

Domestic gas production from NELP blocks needs greater incentives, as the new discoveries are in deepwater and in frontier areas, industry sources said.

Under NELP, companies such as ONGC, Cairn Energy, Reliance Industries Ltd and Gujarat State Petroleum Corporation Ltd have succeeded in striking gas. However, most of these finds or expected finds are in deepwater or in frontier areas needing extensive investment in development of these fields.

The sources said as per reports, the Government was contemplating waiving customs duty and sales tax for imported LNG to be used for power plants. Similar benefits such as exempting payment of royalty and sales tax for the gas produced under NELP could be considered, they said.

"In case full exemption from sales tax is not found feasible, then natural gas may be designated as declared good so that sales tax of four per cent is charged in line with crude oil and other essential commodities," the sources said, adding "this would provide required impetus for overall development of gas fields and augment gas production in the country."

This, according to the industry, would give a boost to Government initiatives to increase availability of natural gas in the country by enhancing exploration through NELP and import of LNG. The initiatives have resulted in a number of gas discoveries in Eastern offshore deep waters as well as commissioning of two LNG re-gasification terminals on the Western Coast.

The product-sharing contract under NELP provides Government share of oil and gas at around 70 per cent. "It is, therefore, just to extend tax exemption on LNG supply to natural gas produced from NELP blocks as well," they said.

Such consideration would create large potential of industrial development, which would bring benefit to the economy, the sources added.

According to sources, the industry has made a representation on the issue to the Finance Ministry in its pre-budget submissions.

(This article was published in the Business Line print edition dated December 13, 2005)
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