With an eventful year gone by and some positive progress in reforms for the Indian economy, India Inc. and Indian citizens are now eagerly looking forward to the upcoming Union budget 2018. There are huge expectations in terms of various developments that would help to move a step ahead towards the overall economic growth. Talking about growth, I would like to emphasise on the oil and gas sector which is one of the most crucial sector for the nation’s development, and is serving as a critical source of energy for India in the present and the foreseeable future.
As we know, we fulfil over 80 per cent of our crude requirements from imports. As per industry projections, India’s crude oil consumption is expected to be more than double by 2040. Due to the geo-political and economic importance of this scenario, the government has been iterating its vision to take the country towards energy security and at the same time, reduce the global trade deficit. Hence we need to emphasise on boosting domestic oil production in order to attain PM’s vision of reducing dependency on imports by 10 per cent by 2022. There are a few challenges that need to be addressed in order to meet the aim of cutting down the dependence on imports and lead the nation towards becoming energy sufficient.
This budget, we expect the cess ad valorem rate to come down from 20 per cent to 8 per cent, while seeking clarity on GST in royalty, cost recovery, cash call and profit petroleum. The rollout of GST, and the exclusion of petroleum sector from its purview, has translated into much higher costs for the sector, defeating the objective of cost neutrality. Another pressing demand is to bring price parity between domestic crude and imports by cutting the 2 per cent CST on domestic production, to further enhance the country’s energy security. While lower cess rate will entail loss of revenue for the government of India, lower production tax shall spur investments leading to additional production and overall increase in taxes to the government in the form of royalty, profit petroleum and corporate taxes.
The government has been formulating reliefs and reforms to strengthen the Indian economy. We hope, the budget would have significant amendments in order to meet the concerns of the industry.
(The writer is the CEO of Vedanta Cairn Oil and Gas)