Vol 3, PW 5 (31 Mar 99) Exploration & Production

Call it favouritism or just good lobbying, local Indian service companies are furious at what they sees as unfair advantages granted by the government to ONGC and Oil India, the countrys two upstream explorers.

In his budget on 27 February, finance minister Yashwant Sinha introduced import duties on a range of capital goods into India, a move designed to protect local producers by effectively ending the so-called Zero Duty Import Regime. Not quite.

Sinha exempted ONGC and Oil India from the measure, in line with similar commitments made to foreign upstream explorers under the New Exploration Licensing Policy (NELP) ie, the right to bring in oilfield equipment (rigs etc) duty free. In the months running up to the budget, ONGC mounted a loud campaign to remain exempt from the abolition of the Zero Duty Import Regime.

On 28 February, a day after the budget, that plea became law in a notification issued by Indian customs. Since them, Indian industry has cried foul.

Two bodies in particular, the Confederation of Indian Industry (CII) and the Association of Chambers of Commerce of India (ASSOCHAM) have roundly condemned the move. The CII claims local Indian manufacturers of oilfield services equipment, such as Larsen & Toubro, will be at a cost disadvantage of between 34-48% because of the move, and will consistently lose orders to overseas suppliers.

For its part, ASSOCHAM has called on the government to restore a series of fiscal advantages to domestic producers (known as Deemed Export Benefits) to enable them to compete with the expected flood of cheap (but no doubt better quality) imports.

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