The Hindu : National : Oil and gas tax breaks restored, but with a rider

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Tuesday, Jul 07, 2009
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Oil and gas tax breaks restored, but with a rider

Sujay Mehdudia

NEW DELHI: Responding to demands by the oil and gas industry as well as the Petroleum Ministry, Finance Minister Pranab Mukherjee on Monday announced restoration of tax breaks on profits made from production and sale of natural gas, but restricted the benefits to blocks to be awarded in the forthcoming New Exploration Licensing Policy (NELP) round VIII.

This is likely to deny any benefit to companies like Reliance Industries Limited (RIL), which is producing gas from an area awarded to it under a similar auction 10 years ago.

However, the Finance Minister, in his budget, extended the seven-year holiday on payment of income tax to private firms that will set up new oil refineries by March 31, 2012. This is likely to benefit the Essar group. Previously, any oil refinery coming up in the private sector after April 1, 2009 was denied the benefit.

He said the tax holiday under Section 80-IB(9) of the Income Tax Act would be available to companies on profits they earned from commercial production of mineral oil and natural gas from blocks awarded under the NELP round VIII of bidding. The budget clearly mentions that the tax benefit would be available in respect of natural gas produced from blocks awarded under NELP-VIII, bids for which are yet to come in.

Silver lining

A silver lining for the gas industry is the announcement of a National Gas Grid and a blueprint for long distance pipeline highways facilitating transportation of gas through the length and breadth of the country.

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