Tribunals, courts to decide oil, gas tax holiday: FM

NEW MEASURES IN FINANCE BILL 2008: IMPACT ANALYSIS

Chidambaram said various tribunals and courts hearing the case would decide if oil and gas production would continue to get the tax holiday beyond April 2009.

Chidambaram was expected to continue the income tax holiday on oil and gas production after Petroleum Minister Murli Deora told him that the withdrawal would discourage investors in the country's exploration and production sector.

Refineries' tax holidays extended
Chidambaram said since three government-owned crude oil refineries coming up in Paradeep, Bathinda and Bina would be able to begin production only by April 2009, the sunset clause for the seven-year income tax holiday for refineries would get postponed to March 31, 2012.

In the Budget 2008-09, the finance ministry had proposed to withdraw the tax holiday for all refineries that begin operations after April 1, 2009.

The petroleum ministry had lobbied with the finance ministry for continuing with the tax holiday as construction of the three refineries, by Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL), respectively, began when the tax holiday was in place.

"The continuation of the tax holiday till 2012 makes our Paradeep refinery feasible, else our rate of return would have come down drastically," said a senior IOC official. The company is planning to invest around Rs 25,000 crore on the 15 million tonne per annum (mtpa) refinery and an adjoining petrochemical plant.

An HPCL official said without the tax holiday, the rate of return on their nine-mtpa refinery would come down to 20 per cent from the current 25 per cent.

Reliance Petroleum's 29 mtpa refinery is scheduled to begin production later this year while Essar Oil is expanding its refinery capacity in Gujarat to 34 mtpa from the current 10.5 mtpa.