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  1. Union Budget 2017: Introduce newer provisions to motivate investments in oil & gas

Union Budget 2017: Introduce newer provisions to motivate investments in oil & gas

Union Budget is looked up to remove anomalies in fiscal and policy domain, introduce newer provisions to motivate investments and provide framework for newer vistas.

Published: February 1, 2017 9:32 AM
Budget 2017, Budget 2017 what to expect, Budget 2017 latest news Low oil price is expected to last longer. That is very good for the exchequer and in turn the economy.

What are the current challenges of the Oil & Gas sector? India is a significantly large oil & gas consumer.  Further, the demand is expected to rise at one of the highest growth rates in the world.  We are not well placed on sourcing.  Our domestic production is expected to remain stagnant, we are yet to have infrastructure in place to import required LNG, and we may run out of refining capacity in few years. Investors view the business environment to be yet to mature for expert companies to unhesitatingly invest.

What can budget do? Union Budget is looked up to remove anomalies in fiscal and policy domain, introduce newer provisions to motivate investments and provide framework for newer vistas.

What are the asks of the sector? Low oil price is expected to last longer. That is very good for the exchequer and in turn the economy. However, the producers and associated business world is counting every penny to run businesses in tighter budget. Industry is asking for a hard and benign look at the situation and remove any avoidable procedural burden or fiscal demands.

In refinery and marketing domain, the industry is nervous with the possibility of an imperfect GST, despite this sector being the largest contributor.  Also, the policy barriers to participation in marketing are viewed as counterproductive to the larger objective of consumer benefit and competitiveness.

In the gas distribution sector, the industry is eagerly waiting for a reform. Anomalies in licensing and operating frameworks have kept large investments away. Gas availability has a magical effect on new industrial investments and pollution abatement; our cities are deprived.

What are your expectations from the Union Budget? In line with the general principles the government has set out, some tax breaks may go away with tax rates reducing.  Looking at the need for domestic oil & gas production growth, the Budget is expected to take steps to attract more exploration investments.  Also expect the need for gas infrastructure to lead to budgetary provisions.

(Article authored by Deepak Mahurkar, Partner and Leader Oil & Gas, PwC)

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