The proposed VAT reduction on CNG/LNG in the Budget to 5 per cent, from 14.5 per cent, is expected to usher in a new wave of industrialisation in Kerala.

By reducing the rates, the government has conceded to the demand of the industry as the high tax rate was seen as an impediment for attracting new investments.

Yogananda Reddy, Chief General Manager and Vice-President, Petronet LNG Ltd, termed the government announcement as a positive development for end-users and the company expects its volume of gas to go up. PLL operates 20 per cent of its five-million tonne capacity terminal in Kochi and this is expected to go up to 30-35 per cent in the next fiscal because of the cheaper availability of gas.

Kishor Rungta, Chairman and Managing Director, FACT, said the move will boost industrial development of the State with the availability of cheap gas. For FACT, it would be more easy to chalk out future plans as the company has to depend on ammonia imports for fertiliser production. With the reduction of VAT on LNG, the company will be able to run ammonia plants.

According to MP Sukumaran Nair, Director of Kochi-based Centre for Green Technology and Management, the 5 MMTPA gas terminal which started operation in 2013 did not achieve capacity utilisation all these years on account of the carrying pipeline not being in place and due to the prevailing 14.5 per cent VAT on gas. Tamil Nadu charges only 4 per cent tax on natural gas and Punjab 3 per cent, he said.

The current move will be a boon to PLL which will see a reasonable growth in capacity utilisation and also provide a boost for gas utilisation in the State. The city and auto gas consumers will get the benefit of reduced tax. The sale of natural gas in Kerala is also likely to increase substantially, thereby yielding increased revenue for the Government, he said.