Energy Security: Why India Needs To Step On The Gas

Energy Security: Why India Needs To Step On The Gas

From a low of $48 in August 2015 to $62 this week, the 30% rise in crude prices has sent alarm bells ringing for the country’s economy. Where India imported just 37% of the oil it consumed, it is now importing 4.4 million barrels of crude oil every day to meet 82% of the country’s demand. Oil alone accounts for 31% of India’s imports. The unprecedented dependence on oil imports and the resultant economic instability are reflective of India’s half-hearted approach to energy security. The need of the hour is to create an ecosystem for encouraging domestic production and cutting down dependence on imports with a sustained approach. To encourage domestic output, the immediate task before the government is to rationalise the heavily skewed tax structure for domestic oil producers and create a level-playing field that will up investments and increase explorations. Today, not only are different norms applicable to different companies, but also the continuation of erstwhile indirect taxes along with the steep rates of levies like cess are choking the domestic companies. Upstream companies have been left stranded with high taxes that are leading to higher blockage of working capital and the resultant opportunity losses. The recent roll-out of the goods and services tax (GST) has further exacerbated the situation. With crude oil falling outside the purview of GST, upstream companies are unable to claim tax benefits even as they bear GST on the procurement of goods and services for exploration. This double impact has dealt a severe blow to the already reeling industry. Few players have opted to move high courts for writ against issues such as prohibition on purchase of products against Form C with effect from July 1, 2017. The other writs which may help the sector include issues such as IGST on ocean freight, reverse charge for procurement from unregistered dealers and taxation of goods in the customs bonded warehouse before the goods cross the customs frontier. Read More…

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