No Windfall Tax on Oil Cos After New Law: Puri

New Delhi, Mar 20 (PTI) Oil and gas companies will not face any new taxes like the windfall profits tax after the coming into effect of a new law that promises stability of fiscal regime, Petroleum Minister Hardeep Singh Puri said.

Parliament has passed the Oilfields (Regulation and Development) Bill, 2024 that provides policy stability to investors, decriminalises provisions and promotes ease of doing business.

"After this bill, it will be difficult to levy (new taxes like) windfall tax because somebody will sue us (for failing to keep the promise of fiscal stability)," he said at a reception he hosted to celebrate the passage of the bill.

Investors looking to invest in finding and producing oil and gas want fiscal stability, and new taxes that seek to take away gains made when prices are high, without compensating for low or no margins when rates are low, are often a deterrent.

India imposed a windfall profit tax on July 1, 2022 joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of Rs 6 per litre (USD 12 per barrel) each were levied on petrol and ATF and Rs 13 a litre (USD 26 a barrel) on diesel.

A Rs 23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied.

The tax rates were reviewed every fortnight based on average oil prices in the previous two weeks. The levy was scrapped in December last year after 30 months.

Puri said global oil majors have been exploring investing in India.

Brazil's Petrobras is in discussion with state-owned Oil India Ltd for exploring the Andaman basins, while Oil and Natural Gas Corporation (ONGC) is engaged with majors like ExxonMobil and Equinor for collaboration in deepwater exploration.

The new legislation "creates conditions for all of them (international oil companies) to come and look at India," he said.

The Bill is part of the government's reforms agenda to make it easier to find and produce crude oil (which is refined into fuels like petrol and diesel) and natural gas (which is used to generate power, make fertilizer or turn into cooking gas and CNG).

It decriminalised some of the provisions of the original 1948 law by introducing penalties in place of imprisonment of up to six months.

The bill introduces 'petroleum lease' and expands the definition of mineral oils to include crude oil, natural gas, petroleum, condensate, coal bed methane, oil shale, shale gas, shale oil, tight gas, tight oil and gas hydrate. This is with a view to raising domestic output and cutting reliance on imports.

India currently imports more than 85 per cent of its crude oil needs and about half of its natural gas requirement.

"We have 42 billion tonnes of oil and oil equivalent reserves and a sedimentary basin spanning 3.5 million square kilometers," Puri said, adding most of it is untapped.

The Statement of Objects and Reasons in the Bill states that the original Act of 1948 provided for a very different global energy context and required to be amended to meet the needs and aspirations of the country for energy access, energy security and energy affordability.

"Further, there is an urgent and pressing need to increase domestic production of oil and gas to meet the rising demand for energy and reduce import dependence of the country.

"In order to unlock valuable mineral oil resources, it is necessary to attract investment in the sector to infuse necessary capital and technology for expediting petroleum operations in the country by creating an investor friendly environment that promotes ease of doing business, prospects for exploration, development and production of all types of hydrocarbons, ensures stability, promotes adequate opportunities for risk mitigation, addresses energy transition issues including next-generation cleaner fuels and provides for a robust enforcement mechanism for ensuring compliance of the provisions of the said Act," it said.

The Amendment delinks petroleum operations from mining operations, broadening the scope of the expression 'mineral oils, introduces the concept of petroleum lease, grants lease on stable terms, provides for efficacious dispute resolution, creates an environment for facilitating energy transition and strengthens petroleum operations through rules framed for governing various functional aspects, such as, grants of leases or licences, their extension or renewal, sharing of production and processing facilities including infrastructure and safety at oilfields.

"It brings Ease of Doing Business by providing a single lease for all hydrocarbons, security of tenure and terms of the lease, decriminalises provisions and empowers independent private operators by enabling sharing of infrastructure and drives India's energy transition by facilitating GHG monitoring and comprehensive energy projects, underlining our commitment towards sustainable development," Puri said.