Make in India boost, oil cess may be halved

New Delhi, Jan 26 : The government may give a ‘Make in India’ push to oil and gas explorers, as it is considering a proposal to almost halve cess on domestic crude oil to encourage exploration activity and allow Covid-hit oil producers to protect their margins.
The glut in the oil market and deep suppression of demand during the peak of pandemic in 2020 had pushed down crude oil prices to unprecedented levels. Though crude prices have recovered over the vaccination drive against Covid and a pick in demand coupled with  unilateral production cut announced by Saudi Arabia, cess puts domestic crude at a disadvantage against imported oil.
Cess on domestic crude is currently levied at the rate of 20 per cent of the value of oil. Official sources said the proposal by the Union Oil Ministry is to reduce it to 10 per cent. If this is accepted by the Finance Ministry, the changes may be announced as part of Budget 2021-22 proposals, sources said.
Though the larger view is in favour of halving the cess, the exact quantum would be worked out later. The reduction in the levy has huge revenue implications as ONGC alone pays cess in excess of Rs 10,000 crore annually.
The changes would also provide a level playing field to domestic companies as imported crude does not attract cess.
“Cess is levied only on crude oil produced domestically. Thus, it places domestic crude oil production vis-a-vis imported crude oil at a significant disadvantage as imported crude does not attract such duty. This levy is against the spirit of ‘Make in India’,” industry chamber FICCI had said in a memorandum given to the Finance Ministry earlier.