Oil firms worried about tax changes

DAY-2 BUDGET 2008-09 IMPACT/ OIL AND GAS

The exclusion of petroleum and natural gas from the broad category of "mineral oil" has put players in the oil and gas sector in a tizzy.

Producers of oil and gas and refiners of crude oil were claiming an income tax exemption under Section 80-IB (9). The Budget proposes an amendment to this section, which says "mineral oil does not include petroleum and natural gas".

ONGC, the country's largest oil and gas production company, is estimated to save close to Rs 4,000 crore annually through this window.

Companies slated to begin oil and gas production were planning to seek tax exemptions under this provision.

"There is just no clarity on the issue. It contradicts commitments made under Nelp agreements. We will be formally seeking a clarification from the finance ministry," said a senior official with Reliance Industries.