Sujay Mehdudia

NEW DELHI: With the Finance Ministry clearing the air on the tax breaks for oil and gas production related activity, the seventh round of the New Exploration Licensing Policy (NELP) could well evoke poor response from the international and domestic investors.

While refusing to extend any further the last date for submission of bids under NELP VII beyond June 30, Petroleum and Natural Gas Minister Murli Deora asked the potential investors to keep in mind while bidding for oil and gas blocks that the promised tax breaks might not come through.

Mr. Deora extended an invitation to all the members of the exploration and production industry to submit their bids by the due date and join hands with the Government in the ever growing success story of India’s oil and gas exploratory activities.

Tax holiday

It is also clarified that as advised by the Ministry of Finance, income-tax holiday will as of now be available for commercial production of crude oil only. Interested bidders are requested to bear the above clarification in mind and bid wholeheartedly. Under the VII round of NELP, 57 blocks are being offered.

However, officials in the Petroleum Ministry feared that Finance Ministry’s insistence on not spelling out clearly if gas production, like oil, would also be entitled to seven-year exemption from payment of income-tax may see NELP-VII getting poor response.

Among the companies that are said to be considering bidding including BG Group of the U.K., British Petroleum and Eni of Italy. Petrobras of Brazil is also expected to make a bid. Informed sources said the bids would close under the cloud of Finance Ministry insisting that the term mineral oil for the purpose of tax holidays include production of only crude oil and accompanying natural gas would not be considered.