stopped by the Finance Bill of 2011. And for blocks falling under new, difficult, ultra deep water and in frontier areas, “the period of tax holiday is proposed for 10 years” to spur investments.
The ULP would also not differentiate between crude oil and natural gas producers on tax holidays, unlike in the pre-2011 period, when gas producers were not exempted from paying income-tax.
The ULP would extend the exploration period to eight years for on-land and shallow water blocks from the present seven years, and would give three more years for exploring deep water and ultra deep water blocks.
Other incentives such as customs duty exemption on import of equipment and non-levy of cess on crude oil that are provided under NELP are proposed to be retained under the ULP.
Alongside the incentives, the ULP introduces stiff financial penalties for defaults by the contractor, unlike in the NELP where the government can only terminate a contract if the operator harms the public interest.
The ministry’s rationale for the required impetus is that nine rounds of NELP since 1999 had “limited success in terms of commercial discoveries and their monetization”. Of the 254 blocks auctioned, commercial production had started in three blocks with total production of 0.4 million tonnes of crude oil and 26.11 million standard cubic metres of gas per day.