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Coming to the rescue of the oil and gas explorers in the country, Prime Minister Narendra Modi assured them that the GST Council will consider their requests for tax rationalisation in all fairness.
The Prime Minister met top corporate honchos and officials from the sector including Rosneft, BP, Reliance, Saudi Aramco, Exxon Mobil, Royal Dutch Shell, Vedanta, ONGC, Indian Oil Corporation, GAIL, Petronet LNG, Oil India, HPCL, and Delonex Energy on Monday.
A CEO who was present at the meeting said, the Prime Minister assured the industry that tax on upstream operations will be rationalised. “The Prime Minister is very conscious of high tax rate on services in upstream sector. He said that service tax on rigs and bunker crude will be rationalised,” the CEO said.
The focus of the meeting was to secure India’s energy future: increase domestic production – aspiration to reduce imports by 2022; build infrastructure: Greenfield and brownfield refineries, petrochemical plants, pipelines, LNG terminals; secure overseas supply – equity, long-term contracts; and attracting FDI and technical expertise.
Industry demandAt the meeting the corporate heavy weights that included Mukesh Ambani, Bob Dudley and others impressed upon the Prime Minister on the need for inclusion of gas and electricity in the GST framework.
A factor that is increasing the costs of operations is that the service providers’ output to the sector attracts 18 per cent rate though they procure at five per cent tax rate.
Meanwhile, Revenue Secretary Hasmukh Adhia, who was also present at the meeting, highlighted the recent decisions of the GST Council regarding the oil and gas sector.
The Prime Minister said that many suggestions received in the last meeting held in 2016 have helped in formulating policies. He also said that the scope for reform in many areas still exists.
Modi also said that the state of the energy sector in India is highly uneven and stressed on the need to develop energy infrastructure and access to energy in Eastern India.
He flagged the potential of biomass energy and also invited participation and joint ventures in coal gasification. As India moves towards a cleaner and more fuel-efficient economy, he also wants its benefits to expand horizontally to all sections of the society, and in particular to the poorest.
Amitabh Kant, NITI Aayog CEO, outlined the recent developments and challenges in the oil and gas sector in India. The players, according to Kant, have assured investments over $1 trillion in the next five years, if a conducive policy environment is created. For example, Rosneft has committed to increase its investments by five times in India’s refining sector. Saudi Aramco said that it will increase its investment by $300 billion over the next three-four years.
Issues such as the need for a unified energy policy, contract frameworks and arrangements, requirement of seismic data sets, encouragement for biofuels, improving gas supply, setting up of a gas hub, and regulatory issues came up for discussion.
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