Brokerage reports indicate that the oil and gas sector expects relief in GST on fuels, ₹35,000 crore LPG subsidy support, and a reduction in CNG excise duty from Budget 2025.
Cut in CNG Excise Duty: The government currently imposes a 14.4% excise duty on CNG on an ad-valorem basis, which adds about ₹9.5 per kilogram to its price. Industry experts believe that reducing this duty could counteract the impact of the withdrawal of cheaper Administered Pricing Mechanism (APM) gas from the sector.
Subsidy for LPG Losses: Public sector oil marketing companies (OMCs) have been struggling with significant under-recoveries on subsidised LPG due to high global prices and capped domestic selling rates. Reports indicate that by the end of the first nine months of FY25, cumulative under-recoveries exceeded ₹29,000 crore. To address this, the government is expected to allocate ₹35,000 crore as subsidies, split into ₹10,000 crore for FY25 and ₹25,000 crore for FY26.
Special Excise Duty on Crude Oil: The Special Additional Excise Duty (SAED) on crude oil production, which was previously revoked when crude oil prices dropped below $75 per barrel, might return as global prices are now approaching $80 per barrel.
GST Inclusion for Oil Products: One of the industry’s top demands is the inclusion of petroleum products under the Goods and Services Tax (GST). The Confederation of Indian Industry (CII), in its budget memorandum, has recommended GST 2.0, suggesting that products like petrol, aviation turbine fuel (ATF), and natural gas be brought under the GST framework. However, state governments have resisted this move, citing potential revenue losses. While decisions on GST fall under the purview of the GST Council, any recommendation from the Finance Minister, who chairs the council, could influence the outcome.
LPG Loss Compensation for OMCs: State-run oil companies such as Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) are hopeful of compensation for losses incurred by selling LPG below market rates. IOCL reported an under-recovery of ₹8,870.11 crore for the first half of FY25. BPCL and HPCL have also faced significant financial pressures due to the regulated pricing structure.
Dependence on LPG Imports: India’s heavy reliance on imported LPG has exacerbated the financial strain on OMCs. Global price increases have contributed to higher under-recovery levels for BPCL, HPCL, and IOCL, as retail prices remain lower than international benchmarks.
Reform Through Oilfield Bill: The Oilfield (Regulation and Development) Amendment Bill is expected to be a significant step toward improving the oil and gas sector. The bill seeks to enhance policy consistency and encourage investment by simplifying procedures and improving the ease of doing business in the exploration sector. Industry stakeholders anticipate its approval in the upcoming budget session.
Introducing Petroleum Leases: One of the key proposals in the Oilfield Amendment Bill is the introduction of a “petroleum lease” mechanism. This provision aims to differentiate oil and gas exploration projects from mining activities, thereby reducing delays caused by land and environmental clearance issues. The bill also seeks to broaden the definition of mineral oils, addressing regulatory gaps.
Legislative Progress on Oilfield Bill: During the winter session of Parliament, the Rajya Sabha passed the Oilfield Amendment Bill. Industry leaders are optimistic about its passage in the Lok Sabha during the budget session. “The amendments proposed in the bill are reformist, and the streamlining of regulatory clearances and arbitration processes will improve ease of doing business,” said by the Chairman and Managing Director of Oilmax Energy Private Ltd.
