The New Exploration Licensing Policy (NELP) has run into fresh problems with the revenue department of the finance ministry failing to clear the petroleum tax code even as the petroleum ministry was ready to launch road shows.
The petroleum tax code, submitted to the finance ministry two months ago, is yet to be approved by the revenue department which is still "scrutinising it."
Without the tax code the petroleum ministry cannot issue notice inviting offers (NIO) under NELP and organise road shows to attract foreign investment in the high-risk oil exploration sector.
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The petroleum ministry is surprised over the time taken by the revenue department in clearing the tax code especially since the code does not have any new law concerning oil exploration and production sector. It is a mere codification of existing taxes under the various tax provisions.
Considering the time taken for publication of NIO in various newspapers and periodicals, officials say it would be possible to operationalise NELP during the current month only if the tax code is cleared by September 20. After the publication of NIO, the government would give the potential bidders around four to five months to bid for the 47-odd blocks being offered under NELP.
The petroleum ministry has already sought state governments' concurrence for the policy which has been plagued by controversies. All the contentious issues, including the loss of royalty to state governments, have been resolved.
Under NELP, royalty payments will be fixed on an ad valorem basis instead of the current system of specific rates. Royalty payments for exploration deep waters will be charged at half the rate for offshore areas for the first seven years after commencement of commercial production.
The policy also allows freedom for marketing crude oil and gas in the domestic market and provides for a seven-year tax holiday after commencement of commercial production for blocks in the Northeastern region. The Oil and Natural Gas Corporation and Oil India Limited will get the same duty concessions on import of capital goods under the new policy as private production sharing contracts.
Cess levied under the Oil Industry Development Act, 1974 has been abolished for the new exploration blocks and a separate petroleum tax code will be put in place as in other countries to facilitate new investments.