Jaswant declines fiscal incentives to LNG sector

Singh’s reason for refusing infrastructure status to the sector for the second time was that the 15-year tax holiday would erode the country’s tax base with little benefit to the consumers. The finance minister also refused to bring down the customs duty on LNG imports to zero, saying that the current 5 per cent was the minimal rate envisaged in the duty structure.

On declared goods status, Singh passed the buck on to the States.

‘‘Consultations with State governments would be necessary because they stand to lose a significant part of the revenue if the proposal is implemented,’’ he wrote to the petroleum minister.

Naik had also asked that the reduced customs duty of 5 per cent on project imports be extended to Petronet LNG Limited by introducing the exemption from retrospective date January 1, 2002. The duty reduction from 25 per cent to 5 per cent was announced in the 2003-04 Budget whereas Petronet, promoted by four government-owned oil and gas companies through a collective equity of 50 per cent, started work on the import terminal last year.

That is the plea Singh uses. ‘‘The grant of exemption cannot be extended with retrospective effect since there is no such provisions under the Customs Act 1962,’’ the finance minister added.

Without these concessions, the delivered price to consumers would be $4.2 per million British thermal units compared to $2.6 per MBTU currently charged for domestically produced gas. The fiscal relief would have brought down the price of imported gas to $3.4 per MBTU, a number acceptable to fertiliser and power producers.