Trade with Commodities: Energy seeks power of good(ies) this time

Sunday, May 17, 2009

Energy seeks power of good(ies) this time

Tax holiday for natural gas production, deregulation of auto fuel prices & cooking fuel sops via smart cards on anvil

NOW THAT IT IS BACK IN POWER, the UPA government may soon return to pushing its unfinished reform agenda in the energy sector.
    On the anvil for the oil & gas sector is a seven-year tax exemption for natural gas production, deregulation of auto fuel prices and direct fuel subsidies on cooking gas and kerosene to the poor through smart cards. The power sector may get fresh policy initiatives to provide it with the muchneeded funds.
    "Tax exemption, currently enjoyed for the production of crude oil, will also be extended to the natural gas sector," a senior Congress leader said on condition of anonymity.
    It is not giving any fresh tax incentives, but only removing ambiguity related to the definition of mineral oil, he added.
    Uncertainty over tax holidays for natural gas producers began after the last finance minister P Chidambaram presented his Finance Bill for 2008-09 that said mineral oil does not include petroleum and natural gas for the purposes of being eligible for tax holidays. Major reforms are also expected in the
current subsidy regime that regulates retail prices of four 'politically sensitive fuels'—petrol, diesel, kerosene sold through fair-price shops and cooking gas, according to officials in the Planning Commission and the petroleum ministry.
    A proposal to deregulate prices of petrol and diesel and give kerosene and cooking gas to the poor directly through a smart card system awaits political clearance. In the power sector, the priority of the government will be to raise the exposure limit of banks to lend to a single or a group borrower.
    The prudential norms for power sector financing companies like Power Finance Corporation and Rural Electrification Corporation, to enable them to lend more, may also be relaxed. Banks too may be asked to look at increasing the exposure limit to the power sector (for direct lending) on individual basis.
    All these proposals have already been discussed by officials of the finance ministry and Reserve Bank of India and the return of the UPA government is expected to hasten the process, said a government official who attended a high-level meeting in the finance ministry in March.