Budget 2012-13: Pranab frees LNG from customs duty, levies cess on crude

Moneycontrol Bureau

Finance Minister Pranab Mukherjee announced an exemption of customs duty on imports of liquefied natural gas import while announcing the union Budget 2012-13. Currently, there is a 5% duty on the commodity. The government will now levy a cess on crude oil to Rs 4,500/tonne, nearly 80% higher then what it was earlier.

The minister also said that viability-gap funding would be provided for pipelines and storage facilities for oil and gas.

Disappointment for oil retailers.

 Hindustan Petroleum, Bharat Petroleum and Indian Oil Corp were keen for getting diesel and LPG de-controlled but nothing of the sort was highlighted in the Budget. Together these companies are reeling under losses of around Rs 1.5 lakh crore due to sale of petroleum products at government dictates prices.

Find out why the oil and gas sector is so crucial and what the sector had expected from the Budget.

The Indian oil and gas sector is one of the core industries in the country and plays a pivotal role in influencing decision in all other spheres of the economy.

*Hence, there is an emphasized need for policies that could fuel further growth in the sector and hence the sector was keen to get tax exemptions on fuel imports and de-regulation of petroleum products- which would eventually bring down their under-recoveries.

*Currently, there is a seven year tax holiday for refining companies. But the exemption is only for those refineries which have been commissioned before March 2012.  If there is an extension granted, it will be positive for the sector as downstream companies like Indian Oil Corp (IOC) are setting up 15 mmtpa refinery in Orissa and could get tax benefits

*Prices of diesel, petrol, kerosene and LPG are expected to increase. If this happens it will be a big positive to Hindustan Petroleum, Bharat Petroleum and IOC, since their under-recoveries will come down to an extent. It will also reduce subsidy burden of ONGC and Oil India.

*There is a 2.5% import duty on petrol and diesel and 5% on LNG and natural gas which is unlikely to change in the upcoming budget