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National gas grid on the anvil

To facilitate transportation of new gas discoveries, Finance Minister Pranab Mukherjee has announced long distance national gas highways leading to the formation of a national gas grid in his budget proposals for 2009-10, reports Anupama Airy.

delhi Updated: Jul 07, 2009 00:29 IST
Anupama Airy

To facilitate transportation of new gas discoveries, Finance Minister Pranab Mukherjee has announced long distance national gas highways leading to the formation of a national gas grid in his budget proposals for 2009-10.

With the recent discoveries of natural gas in the country, production is set to double, with natural gas emerging as an important source of energy.

HT on June 30 had written about a blueprint being developed for long-distance gas highways. The petroleum ministry will announce the details of the scheme later.

To encourage investment in developing oil and gas pipeline infrastructure, Mukherjee also announced income tax exemptions for companies investing in pipelines. The move will benefit companies such as Reliance Gas Transportation India Ltd, a subsidiary of Reliance Industries, GAIL India Ltd, and L&T.

Mukhejree also gave companies like Essar Oil a boost by extending the seven-year holiday on payment of income tax to private firms that set up new refineries by March 31, 2012.

Previously, refineries coming up after April 1, 2009 in private sector were denied the benefit.

“The budget has extended the benefit of Section 80-IB to the private sector refiners which is a welcome move and will help the flow of investments,” said Naresh Nayyar, MD, Essar Oil Limited.

Mukherjee also announced restoration of tax breaks on profits made from production and sale of natural gas, but restricted the benefit only to blocks to be awarded in the forthcoming auction, depriving firms like Reliance Industries Ltd (RIL) of the gain.

Tax holiday under Section 80-IB(9) of the Income Tax Act will be available for companies on profits they earn from "the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the New Exploration Licensing Policy (NELP) VIII round of bidding".

The tax benefit will be available on gas produced from blocks awarded under NELP-VIII, bids for which are yet to come in, and which “begin commercial production of natural gas on or after April 1, 2009”.