Budget 2019 India: In the gas sector, wherever there is infrastructure available, there is a challenge with respect to transporting gas on long distances and its taxation.
Budget 2019 should look to de-bottleneck oil and gas production, and make investment more friendly for the private sector, says Deepak Mahurkar, Partner and Leader Oil & Gas , PwC India. In an interaction with Financial Express Online, Deepak Mahurkar highlights how Budget 2019 can take significant steps for natural gas infrastructure and LPG cylinders distribution. Edited excerpts:
What is the biggest challenge for the oil & gas sector right now?
For the hydrocarbon sector, there are two challenges, incidentally, both belong to energy security. The foremost is, that all the energy load is coming on liquid petroleum and India has not able to produce sufficient crude oil and natural gas to meet its energy requirements. As regards the load on liquid petroleum, the reason is very obvious. Either coal supplies the energy or the only alternative to that is the diesel, LDO, LSHS, and similar products, which are trying to meet the transport industrial and commercial needs. This is unsustainable from a current climate perspective. Similarly, if domestically produced natural gas and crude are not available, then there is a significant load on imported petroleum products and imports of crude and natural gas and that is leading to serious economic challenges including trade imbalance.
How can Budget 2019 address these concerns?
Anything which bottlenecks oil and gas production or supply of natural gas for the economy needs to be addressed. There is a challenge with respect to the creation of natural gas infrastructure. For infrastructure creation, attractive investment regimes need to be created for companies to put in capital. Private-public partnerships, additional participation of private sector in taking risks in pipelines distribution networks, LNG terminals are the way to go for the natural gas sector.
From the Budget 2019 perspective, to debottleneck production, the above-the-ground risks need to be dealt with by the government for all the investors who are willing to put their money into India to increase domestic oil and gas production. As yet, we are not seeing results of the last licensing rounds. Oil & gas production isn’t seeing the increase which we would like it to and therefore, dealing with those investor challenges, removing ambiguities of the licensing operating regimes and ensuring that our contracts are investor-friendly, is necessary.
What are the 2-3 other important steps that the government should take?
In the gas sector, wherever there is infrastructure available, there is a challenge with respect to transporting gas on long distances and its taxation. So, if I may ask, one of the most important things that the Budget 2019 could deal with is enabling swap of natural gas, making gas on gas competition possible and making the taxation regime for natural gas so convenient in the form of a classical GST that buyers and sellers are able to take credits for the values and taxation.
PM Modi wants to build new India. Your out-of-the-box idea for this Budget 2019?
LPG sector is getting interesting. In the last 4 or 5 years, the government achieved amazing results with respect to the distribution of cylinders. The LPG demand is yet to pick up and the teething troubles aren’t getting over. So, let’s think a bit out-of-the box; can we hand over the supply chain of LPG to private sector as much as possible? Actually, we should try and see why the public sector should continue to own that chain or not have the work done from private sector.
Secondly, how can we stop the act of getting a cylinder at home a momentous moment? Can we ensure that cylinders are available on the go? Importantly, the amount of money that the villagers are paying for getting a refill, can that be micro-financed? There is a Direct Benefit Transfer (DBT), which takes place virtually within a few hours and probably the banks will be very happy to microfinance the balance or the DBT amount for a few hours.