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Gas distribution companies want uniform tax structure

business Updated: Jul 14, 2015 00:54 IST
Aman Malik

New Delhi based gas distribution companies are lobbying with the government to exclude compressed natural gas (CNG) from central excise.

A person in direct knowledge of the matter said that government-owned or backed city gas distribution (CGD) companies want a uniform tax structure for CNG across the country. “Varying tax rates in different states creates price distortion for natural gas. This needs to be controlled,” the person said.

Companies such as GAIL Gas, Mahanagar Gas, Gujarat Gas Company and Indraprastha Gas operate in specific geographies.

Such renewed demands for rationalisation of the tax structure come as the response to the latest round of license auctions for city gas distribution by the Petroleum and Natural Gas Regulatory Board (PNGRB) have been rather lukewarm. Eight out of the 20 areas that went under the hammer received no bids, while two areas received one bid each.

Gas distributors however say that operating in large districts with sparse populations is unviable unless the rules of the game are fundamentally changed.

They want natural gas deemed a “declared good,” a move they say will bring down the price.

Moreover, they want the city gas distribution sector to be given the status of a public utility, something that would allow them to construct pipelines and other civil work without paying the local municipal authorities.

However, since such moves would mean revenue loss for state governments, there could be political resistance.

The Narendra Modi-led government has an ambitious target of achieving 10 million piped natural gas connections by 2019-20 from the current 2.7 million.

Further still, gas companies want those areas in cities where piped natural gas infrastructure exists, to be declared “subsidised LPG free zones.”

“Simply put, in areas where piped gas is available, people should not be given subsidised LPG cylinders,” the person said, adding that such a system worked in China. In effect, such a move would give distributors captive markets, although it will help the exchequer save some money on reduced subsidy.