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Withdrawal of tax holiday may impact NELP-VII

Special Correspondent

Petroleum Ministry awaits Prime Minister, Finance Minister response

NEW DELHI: Faced with prospects of a ‘poor response’ to the Seventh Round of New Exploration Licensing Policy (NELP), in view of withdrawal of tax holidays for upcoming refineries after March 2009, the Union Petroleum and Natural Gas Ministry has taken up the matter with the Prime Minister, Manmohan Singh. The NELP-VII will close on April 25.

“I have taken up the matter with the Prime Minister and also written to the Union Finance Minister, P. Chidambaram, to re-consider the tax withdrawal. We should stand by the commitment given at the time of unleashing the NELP policy and I am hopeful that both the Prime Minister and Mr. Chidambaram would give a positive response,” Petroleum and Natural Gas Minister, Mulri Deora, said on Saturday.

Senior officials in the Petroleum Ministry indicated that due to muted response of the Finance Ministry on the issue, the Ministry was even contemplating withdrawal of NELP-VII lest it is faced with a huge embarrassment. The officials indicated that after the withdrawal of the tax holiday clause in the Union Budget, the NELP-VII, which had received tremendous response during the roadshows in various countries, had been badly affected. “The investors have sent us clear signals that under the given circumstances, they would not be in a positive to commit big investments,” a senior official said. Interestingly, it is not only international players but also domestic oil marketing companies (OMCs) which are crying foul over the move. The Oil and Natural Gas Corporation (ONGC) has indicated that it would have to review the setting up of new refineries at Kakinanda in Andhra Pradesh and Rajasthan and expanding the capacity at Mangalore.

Similarly, IOC’s plans to develop refineries in Bina and Paradip could take a hit and force the organisation to re-work its strategy. The withdrawal of tax holiday has also put a question mark over the Rs. 9,000 crore refinery complex being set up at Bhatinda by Hindustan Petroleum Corporation jointly with the Mittal Group.

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