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Restore tax breaks for oil, gas producers: Deora writes to PM

NEW DELHI: With Petroleum and Natural Gas Minister Murli Deora petitioning Prime Minister Manmohan Singh for restoration of tax breaks for producers of oil and gas, the final call on the issue is likely to be taken by the Union Cabinet.

A decision is expected before June 30, the last date for submission of bids under the New Exploration Licensing Policy (NELP) round VII.

Informed sources said that Mr. Deora had written to the Prime Minister last week seeking his intervention to get round Finance Minister P. Chidambaram to restore the tax breaks for oil and gas production failing which it could have a negative impact on NELP VII and investment.

Bids for 57 areas are on offer in this round. The Finance Ministry has made it clear that the seven-year tax holiday was only for crude oil production and natural gas producers cannot avail themselves of the benefit.

Mr. Deora wrote that the Union Cabinet had in 1997 decided to extend certain fiscal benefits under NELP for exploration and production of oil and gas, the sources said.

While the Finance Ministry said the term ‘mineral oil’ for the purpose of tax holidays includes production of only crude oil, Mr. Deora cited several definitions in the Mines Act of 1952, Mines and Minerals (Development and Regulation) Act of 1957, Petroleum and Natural Gas Rules of 1959 and Oil Industry (Development) Act of 1974 to state that mineral oil contains both oil and gas.

“Our concern is that many potential bidders may be deterred by this uncertainty and keep off from bidding. It will be a total lose-lose situation if we were to now attempt an interpretation at variance from how it has so far been understood uniformly by the legislature, judiciary, industry and us,” the letter adds.

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