DIPP Turns Down Oil Companies for Activities in India

Bharat Petroleum Corporation Limited, The Government of India has issued the following news release:

The commerce and industry ministry has rejected the demand of oil exploration firms to be given fiscal incentives such as subsidy for their activities in northeastern India. Oil companies such as ONGC, Oil India, Jubilant Energy and Assam Company urged the government to include exploration and production (E&P) business in the list of industries getting fiscal incentives under the North East Industrial and Investment Promotion policy (NEIIP).

The department of industrial policy and promotion (DIPP) has turned down the proposal saying oil and gas explorers do not manufacture products, government and industry officials said. DIPP said the government had decided not to expand the service sector under NEIIP since subsidies offered by the department was aligned to the national manufacturing policy to boost manufacturing. NEIIP provides subsidies to manufacturing and select service sector enterprises on condition that the beneficiary units should refund subsidies if they stop their activities within five years of commencing commercial production.

"Thus, the proposal to consider grant of subsidy for E&P units, which are not able to make successful discovery in the North East is not in harmony with the objectives of the scheme," the department said in a letter to the oil ministry. The subsidy policy was launched in 2007 to provide 10-year fiscal incentives that included 100% income tax and excise duty exemptions. The policy also provides capital investment and interest subsidies. Its benefits include reimbursement of insurance premium. But industries in the negative list are not eligible for these incentives.

"DIPP has asked the oil ministry to formulate its own scheme to incentivize exploration companies working in the north east," an oil ministry official said. But industry officials defended industry's position. "It is true that petroleum refineries are in the negative list of NEIIP, but refineries should not be confused with E&P," one official said. It appears that the intent of the policy was to exclude oil refinery from availing incentives, an industry official said. But due to the ambiguous language, it is being misinterpreted as to exclude crude oil and natural gas produced by upstream companies, the official said.

The northeastern region has huge hydrocarbons potential and an unambiguous fiscal incentive package would attract investments, executives of oil companies said. According to industry estimates, the region has about 5.75 billion barrels of oil reserves and more than 21 trillion cubic feet gas. The Assam-Arakan basin that covers an area of 116,000 square kilometers is highly prospective.

Copyright 2013 Plus Media Solutions Private Limited All Rights Reserved

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here