The petroleum ministry has asked the finance ministry to give infrastructure label to exploration and production (E&P) of hydrocarbons as well as to extend the subsidy on domestic LPG and kerosene beyond March 2010, when the existing scheme expires.
Despite its desire to cut back on subsidies to reduce fiscal deficit, the finance ministry has agreed to extend the subsidy scheme on domestic LPG and kerosene which was introduced after scrapping administered pricing seven years ago to make these fuels affordable. The Centre?s annual budgeted subsidies for selling the two fuels cheap is Rs 2,840 crore this fiscal. The actual subsidies are much higher.
It, however, is reluctantly weighing the demand to give infrastructure status to exploration and production of hydrocarbons, a demand it had turned down last year. Infrastructure status would make E&P activities eligible for a 10-year income tax holiday anytime during the first fifteen years of its operation.
?The public distribution kerosene and domestic LPG subsidy scheme of 2002, that expires by fiscal-end, would be extended. We are also making a compelling case for giving infrastructure status to exploration and production. Now we get tax incentives in piecemeal (for certain segments),? said a petroleum ministry official, who asked not to be named.
