JOIN USOil ministry pitches for deregulation of fuel prices
This and other issues figured at an hour-long pre-budget meeting Petroleum Minister Murli Deora had with the Finance Minister Pranab Mukherjee here. Considering the political sensitivity, Mukherjee was understood to have not given a clear reply on deregulation of prices.
Since deregulation is part of a larger issue, it would be discussed at length with various stakeholders and the Union Cabinet will take a final view, sources said.
“Global crude oil prices have breached the $72 a barrel mark. Public sector oil retailers
are likely to lose Rs 60,000 crore this fiscal if retail prices are not revised upward with the hardening of crude oil prices,” Deora told newspersons. He said the government had several options to bail out sate-owned oil retailers, who are selling petroleum products below cost price. These include raising the retail prices of petrol and diesel, issuing bonds to oil companies to make up for the revenue loss and asking upstream firms like
ONGC and GAIL to sell crude to PSU oil retailers at a discount.
At his meeting with the finance minister, Deora pushed for restoring tax breaks on natural gas production as is given for crude oil.
“We have pleaded that the seven-year tax holiday from payment of income tax should also apply to natural gas as is available on crude oil production,” he said.
The Cabinet had guaranteed exemption from payment of income tax on oil and gas production from areas awarded under the New Exploration Licensing Policy (NELP). But the finance ministry last year said this fiscal incentive was meant for oil only.
This stand, which ran contrary to the government's written commitment while attracting investment under NELP since 1999, led to a poor response to the last auction round.
This ambiguity over tax incentives has also led to postponement of the eighth round of bidding under the NELP.