Government likely to levy windfall tax on domestic natural gas: report

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The Union government could place national natural gas under the windfall tax as it explores various options to meet rising fuel, food and fuel subsidy bills. fertilizer, Hindustan time reported, citing two people familiar with the development.

Domestic natural gas is a key input in the production of fertilizers.

“This is one of several proposals being considered to mobilize additional resources, with the government’s fertilizer subsidy alone expected to exceed 2.5 lakh crore in FY23, a jump of more than 138% from the (BE) budget estimate,” they added on condition of anonymity.

They further added that if possible, the proposal could have retroactive effect.

According to the report, two industry experts working for gas producers said on condition of anonymity that the idea of ​​imposing a windfall tax on household gas is not justified because gas prices are set by an approved formula. by the government.

“Additionally, the price of gas produced from the deepwater blocks is just over $12 [per unit], which is significantly lower than international gas prices hovering around $40. As producers are denied the market price, there is no reason to impose a windfall tax,” one said.

Another expert added that there is no correlation between the fertilizer subsidy and locally produced natural gas, as imported LNG is mainly used in fertilizer plants.

The fertilizer industry requires approximately 45 million standard metric cubic meters per day (mmscmd) of gas. While 15-18 mmscmd is covered by long-term LNG contracts, around 15 mmscmd of gas is supplied by state-run domestic producers such as ONGC and the balance is purchased on the spot market.

During the visit to the United States, Finance Minister Nirmala Sitharaman in conversation with eminent economist Eshwar Prasad at the prestigious Brookings Institute said: “There are things going on outside, which definitely hit us…, Fertilizer, it is at great risk. Last year we had to give 10x [ten times more] the price on [its] imports, and obviously Indian farmers are still not really big farmers [who can afford it].”

She also added that India’s next annual budget will need to be very carefully structured to support the country’s growth momentum.

“The details (of the next budget) can be difficult at this stage because it’s a bit too early. But overall, growth priorities will remain absolutely top priority. Even as I speak of the concerns that inflation brings me. Thus, fears of inflation will have to be taken into account. But then how would you handle the growth would be the natural question,” Sitharaman said.

Earlier on Wednesday, the government had approved a one-time grant of 22,000 crore to state run fuel retailers for selling cooking gas (LPG) at below market prices. The Union Cabinet led by Prime Minister Narendra Modi in a meeting on Wednesday approved the one-time grant to three oil marketing companies – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), Anurag Thakur said during a press briefing.

The subsidy was intended to cover losses incurred in selling LPG at below-cost prices to consumers from June 2020 to June 2022. The three companies sell domestic LPG at government-regulated prices to consumers. Between June 2020 and June 2022, international LPG prices have increased by around 300%.

However, to protect consumers from fluctuations in international LPG prices, the cost increase has not been fully passed on to domestic LPG consumers, according to an official statement.

As a result, domestic LPG prices only increased by 72% during this period, he said, adding that this resulted in significant losses for the three companies.

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