Oil sector outlay may go up

RUN UP TO BUDGET 2006

Nelp sixth phase and Coal Bed Methane exploration third phase to get much of investment.

The government may increase the outlay for the petroleum sector by 22.5 per cent in 2006-07, apart from extending the Jan Kerosene Pariyojana scheme as a measure for preventing diversion and adulteration of the PDS kerosene. This will take the annual outlay to Rs 36,003 crore from Rs 29,403 crore during 2005-06.

Much of the investment envisaged is expected in the exploration sector through the sixth phase of the National Exploration Licensing Policy and the third phase of the Coal Bed Methane exploration. The new phases of both programmes are expected to be launched in early 2006.

The extended Jan Kerosene Pariyojana will cover the entire country. The scheme was launched in October 2005 as a pilot project and was implemented in 412 blocks of the 4,000 blocks in the country.

This scheme is aimed at ensuring that the heavily-subsidised kerosene (subsidy is expected to be as high as Rs 12.96 per litre in the current year) reaches the intended beneficiaries only, thereby checking misuse. The Rangarajan Committee on fuel pricing has already recommended that kerosene subsidies be given to only below-poverty-line households.

The year 2006-07 may also see a push to the exploration and production sector. The exploration and production (E&P) sector may get infrastructure status, thereby qualifying for a 10-year tax holiday.

The petroleum ministry has sought infrastructure status for LNG import projects and cross-country pipelines. Moreover, in order to promote domestic exploration and production, Petroleum Minister Murli Deora has also asked for eliminating service tax on survey and exploration of minerals.

Other issues that may be addressed in the forthcoming Budget include reducing Customs to zero on capital goods imported for new refineries, or for refinery expansion and green fuel projects.

Natural gas may also be accorded "declared goods status", thereby attracting a uniform 4 per cent sales tax all over the country. States currently levy sales tax ranging from 8 to 14 per cent on natural gas. Deora has also asked for similar exemption for cooking gas and PDS kerosene.