The Oil and Natural Gas Corporation (ONGC) is likely to be hit by the eight per cent import duty imposed in the Union budget by finance minister Yashwant Sinha.
The corporation imports equipment for its exploration and development activities and ONGC officials fear they will have to fork out more if asked to pay an additional eight per cent duty. They have sought an exemption from the hike, saying the duty will raise cost of operations by between Rs 200-Rs 300 crore.
The corporation has sought the exemption "in line with the private sector as this would help the exploration sector."
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Though ONGC has no big projects lined up for the near future, sources indicate that implementation of smaller projects would mean import of equipment, purchase of pipes, certain chemicals and cement in the global market. The small projects include drilling and production activities in D-series and B-55 at Bombay Offshore and development of new fields at Gandhar and Assam.
"The hike in the customs duty will result in ONGC incurring heavy expenditure towards building platforms and other related activities. Smaller projects like building platforms will require imported goods which is likely to shoot operation costs," ONGC officials said.
Besides exemption from the duty levied on capital goods, it has also sought a clarification from the finance ministry regarding "whether equipment imported for exploration activities will be totally exempted from the duty hike". ONGC plans to set up power plants at Hazira, next to its own complex. It has entered into an agreement with NTPC for setting up a 300-mw power plant there.
Sources indicated that ONGC already has expertise to generate power. It produces 200 MW of power at its offshore installations using gas turbines.
ONGC intends to use the same expertise while drawing NTPC's know-how in transmission and distribution. A memorandum of understanding between ONGC and NTPC was signed in April 1998.