Suresh Mathur wants uniform 4% tax on LNG

Vol 6, PW 9 (03 Jul 02) Midstream & Downstream

INDIA IS WOEFULLY short of gas, there's no doubt.

Nor is there any doubt that gas imports are inevitable to meet scarcity and rising demand. In Gujarat, Petronet LNG's Dahej terminal will be the first to land imported LNG in early 2004.

Shell's Hazira terminal will follow soon after. Yet bizarrely, LNG imports - even at the best price - may be unaffordable for customers in the power and fertiliser sectors: when the LNG is regassified, it will be hit by phenomenally high sales taxes, as individual states try to squeeze money from oil companies.

As a result, the final cost to power and fertiliser customers will rise to an unsustainable level. Gujarat, with plans for four LNG import terminals, is the worst offender, with a sales tax of 22%.

Uttar Pradesh and Delhi, both major markets, charge 20% sales tax. Madhya Pradesh has the lowest sales tax at 8%, but even this makes natural gas more expensive than a polluting fuel like coal.

Is it any wonder Bharat Petroleum, GAIL and Indian Oil are having a tough time selling Petronet-LNG's gas from Dahej The solution is obvious: streamline different sales taxes in to a single rate. Will it ever happen Quite possibly, if the government listens to the tireless persuasion of Suresh Mathur, chief executive officer and managing director of Petronet-LNG.

Mathur's lobbying with his Shastri Bhawan bosses appears to be making some headway. On 4th June he wrote to the oil ministry making a strong case to re-classify LNG as a Declared Good under the Central Sales Tax Act.

See below.

LNG Summit