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BUDGET WISHLIST: CST on petro products be reduced to 1%, says firms

In the run-up to Union Budget for 2015-16, Business Standard looks at major developments and industry expectations in key sectors of the economy

BS Reporter 

A worker loads empty Liquefied Petroleum Gas (LPG) cylinders onto a supply truck in Chennai

OIL & GAS SECTOR

KEY DEVELOPMENTS 

  • Deregulation of diesel prices
  • The government is preparing to offer 54 blocks in the 10th round of bidding under the National Exploration Licensing Policy (Nelp)
  • As part of pricing reforms for the natural gas sector, the government in 2013 approved a new pricing scheme, further aligning the prices in the domestic market with those in the international market, and raising investment for the sector


KEY ISSUES 
 
  • High dependence on oil imports
  • Almost static domestic oil production and declining gas production
  • Inadequate infrastructure in the gas market 
  • Underrecoveries in the downstream petroleum sector


LK Gupta, MD & CEO, Essar Oil
“Putting petroleum products under the ambit of GST will have been a major tax reform. The govt should reduce central sales tax to 1%, in line with the proposed Constitutional Amendment Bill for GST, before eventually making it zero”


 
Business Standard had invited readers’ queries on the for 2015-16. A PwC expert answers key questions
 
Deepak Mahurkar, leader (Oil & Gas), PwC India
What can salaried individuals expect for the oil & gas sector from the — Sumit Bansal

Decontrol of diesel and petrol prices is expected to induce competition in fuel retailing. Consumers will benefit by up to 10% in the near term, with a combination of quantity and price check. Targeted LPG and kerosene subsidy will save hundreds of crores of rupees for the exchequer, boosting developmental spending with mid- and long-term benefits for the common people.

What happens to Nelp-IV? How do we go about the much-hoped increase in gas production? — Ramachandra V Sakhadeo

The govt appears to be committed to improving operations by debottlenecking decisions. The gas price decision and guidelines for obtaining approvals provided recently also appear to be in the direction of building operator confidence. The intent seems to enhance production in the already-awarded acreages and in the pre-Nelp blocks. The govt is expected to now embark on the next action of new acreage awards. The Directorate General of Hydrocarbons has announced the proposed acreages. The ongoing consultation with stakeholders might result in award policy changes. As is inherent in the exploration and production sector, the positive outcomes of policies take about a decade, so gas production increase as a result of the changes might come in the medium term — more certainly in the long term.

Is the fall in global crude oil prices good for the Indian economy, irrespective of the extent of decline? — Rahul Dogra

The crude oil price drop is good for the Indian economy on all counts. Saving of foreign exchange outgo, reduced cost of fuels for consumers, enhanced exchequer earnings with the adopted fiscal policy of increasing excise duty, better fiscal deficit and trade deficit situation, and many such benefits will accrue. Some of these are such large benefits that the Indian economy might turn around.