BUDGET EXPECTATIONS: OIL & GAS

17 Jan 2023 , 09:50 AM

During FY2023, oil marketing companies (OMCs) incurred huge losses on the sale of auto fuels and LPG owing to elevated crude oil prices. While in October 2022, the Government of India (GoI) approved a one-time grant of Rs 220 billion to PSU OMCs for losses incurred on the sale of LPG, the grant only partially compensates for the losses incurred. Accordingly, the industry’s expectation is for an adequate budgetary provision to compensate for the losses incurred on the sale of auto fuels and LPG. Additionally, given the high price of LPG cylinders, the GoI is expected to continue providing subsidies for the beneficiaries of the Ujjwala scheme.

The Government had imposed special additional excise duty (SAED) on crude oil and certain refinery products w.e.f. July 1, 2022. Although, it has revised SAED multiple times, these taxes have pared the profitability of upstream companies and refiners. With the softening of crude prices and reduction in GRMs, the industry has been demanding that SAED be discontinued.

Natural gas, crude oil and other petroleum products (MS, HSD and ATF) are currently outside the GST purview. These products are subject to excise duty levied by the Central Government and VAT levied by the state governments. There has been a long-standing demand from the industry to include these products under the GST regime to enable free flow of input tax credits (ITC) and avoid stranded taxes. Also, liquified natural gas (LNG) imports attract customs duty of 2.5%. Exempting LNG imports from customs duty like crude, which attracts nil duty, would promote the use of natural gas as a fuel. The GST on regasification of LNG remains high at 18%, thereby increasing the landed cost. Accordingly, there is a request from the industry to the Government to reduce the GST rates, given the high prevailing price of LNG.