Useless budget from Sinha for the oil sector

Vol 6, PW 1 (13 Mar 02) People & Policy

YASHWANT SINHA IS clearly no friend of the oil sector.

The Indian finance minister's 28th February budget was a disaster - to put it mildly - for a sector looking for support. Worst hit is ONGC and Oil India, who now have to pay Rs1, 800 cess on every tonne of crude they produce: Sinha doubled the cess rate from Rs900 with immediate effect.

Sinha ignored almost all the other demands made by Shastri Bhawan. Only some changes to the post-APM duty structure and a reduction in corporate tax on foreign companies from 48% to 42% will be welcomed.

Luckily, his decision to double cess - ostensibly to fund subsidies on kerosene and cooking gas - won't affect private oil explorers or those with NELP contracts. By contrast ONGC reckons it will have to pay an extra Rs200cr a month, cancelling any gains that it will make from the free market pricing of crude.

Sinha's budget ignored pleas to reduce import duties and allow tax breaks on equipment to set up LNG terminals or to give the sector 'infrastructure status'. Also hit hard were moves to promote the use of LNG or natural gas: Sinha did not streamline widely divergent sales tax rates on natural gas imposed by different states.

He refused to lower import duties on equipment for refineries to produce less polluting fuel. Ditto for LPG use as fuel for cars.

And setting up crude oil refineries will now become costlier thanks to the budget, which raised customs duty from 21.8% to 26.67% on 'specified' goods.

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