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Last Updated : Feb 01, 2017 04:35 PM IST | Source: Moneycontrol.com

Union Budget 2017-18: Favourable proposals for oil & gas sector, says K Ravichandran

K Ravichandran, Group Head, Corporate Sector ratings at ICRA is of the view that Union Budget has several favourable proposals for the oil & gas sector such as creation of two more strategic oil reserve projects, reduction in basic customs duty (BCD) on LNG from 5 percent to 2.5 percent and creation of an integrated oil PSU major.


K Ravichandran, Group Head, Corporate Sector ratings at ICRA :

The Union Budget has several favourable proposals for the oil & gas sector such as creation of two more strategic oil reserve projects, reduction in basic customs duty (BCD) on LNG from 5 percent to 2.5 percent and creation of an integrated oil PSU major. The creation of additional strategic oil reserves will boost the energy security of the nation, besides the refineries. Reduction in BCD on LNG is a welcome move, which will make LNG more affordable to end users in industrial category such as ceramics, glass, chemicals besides large consumers such as power and fertilizer sectors.

This is a credit positive for existing regassification terminal owners such as PLL, GAIL and Shell India, besides new projects being set up. Moreover, it will help gas marketers and CGD companies such as IGL, MGL and Gujarat Gas.

As regards the creation of an integrated oil major, while the idea is certainly laudable which will strengthen the business and financial risk profile of the combined entity, key challenge will be integration issues especially on the HR side.

Globally, the concept of stated owned oil majors is a well established one, which confers several advantages to the stakeholders. 

First Published on Feb 1, 2017 04:35 pm
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