Finance minister Arun Jaitley is expected to announce measures to incentivise domestic oil and gas production, in the Union Budget on February 28.
Officials said that by bringing parity between imported and domestic crude oil, the government will send the right policy signals to current and future investors in India’s oil and gas exploration sector.
“The government may do away with the central sales tax (CST) on domestic crude oil in order to incentivise domestic oil and gas exploration and production,” a government official said, seeking anonymity.
After witnessing an exodus of foreign companies on the grounds of restrictive regulations and policy delays, India is once again back on the radar of leading global firms.
“Domestic exploration and production sector would also get a boost when it is assured that it will not be placed at a disadvantage vis-à-vis imports,” said the official source.
According to top petroleum ministry officials, US energy giant Chevron Corp, which is also the world’s third-largest oil company, has shown interest to invest in the country’s oil and gas sector.
French energy company, Total SA, is also keen to spread its wings in India’s energy business that includes fuel retailing and solar power, official sources added.
Oil minister Dharmendra Pradhan had recently met Chevron executives, including its global vice-president Jay R Pryor, and discussed investment opportunities in the sector.
Companies who exited India’s energy space citing regulatory hurdles and policy paralysis include the world’s biggest miner, BHP Billiton, Australia’s Santos.
It is also likely that the finance minister may re-introduce the 5% customs duty on crude oil imports to rake in $3 billion for the state exchequer, sources said.