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IMPACTIMPACT OFOF CHANGESCHANGES ININ VARIOUSVARIOUS
TAXATIONTAXATION PARAMETERSPARAMETERS ONON GASGAS
PRICEPRICE..
T.K.CHATTERJEE (GM-NTPC)
USE OF NATURAL GAS FOR
POWER GENERATION
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0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Series1
Series1 25 90% 55 60% 0 90% 9 90% 2 70% 5 00%
Hydro Coal Oil Gas Nuclear Renewable
INDIAN POWER SECTOR:PRESENT GENERATION CAPACITY MIX
Govt. Vision: Reliable, Affordable and Sustainable
power for all by 2012 .
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WORLD PRIMARY ENERGY MIX
6.51%
26.40%
37.30%
23.90%
6.14%
0.00%
10.00%
20.00%
30.00%
40.00%
HYDEL COAL OIL GAS NUCLEAR
HYDEL
COAL
OIL
GAS
NUCLEAR
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BENEFITS OF GAS BASED GENBENEFITS OF GAS BASED GEN
Less gestation period of gas based powerLess gestation period of gas based power
stationstation
clean environmentclean environment Proper energy mix to help improve country'sProper energy mix to help improve country's
energy security.energy security.
Improved EfficiencyImproved Efficiency
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RECENT DEVELOPM ENTSRECENT DEVELOPM ENTS
GAS SECTORGAS SECTOR
EnergyEnergy SecuritySecurity withwith balancedbalanced fuelfuel mixmix::CentralCentral toto GOIGOI agendaagenda..
NationalNational EnergyEnergy policypolicy:: underunderconsiderationconsideration
IncreasedIncreased thrustthrust onon SelfSelf sufficiencysufficiency ininHydrocarbonHydrocarbon SectorSector .. NELPNELP andand otherother
policypolicy initiatives,initiatives, inin lineline withwith HydroHydroCarbonCarbon VisionVision 20252025 .. PetroleumPetroleum andand NaturalNatural GasGas RegulatoryRegulatory
BoardBoard BillBill :: underunder activeactive considerationconsideration ofof
GOIGOI
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RECENT DEVELOPM ENTSRECENT DEVELOPM ENTS
GAS SECTORGAS SECTOR
NaturalNatural gasgas pipelinepipeline policypolicy:: underunderconsiderationconsideration
TariffTariff commissioncommission :: ToTo looklook intointo gasgas pricingpricing
andand transportationtransportation tarifftariff AdventAdvent ofof LNGLNG :: DahejDahej andand HaziraHazira terminalsterminals
alreadyalready commissionedcommissioned.. ManyMany moremore onon thetheanvilanvil
TransnationalTransnational pipelinepipeline ::IranIran India,India, MayanmarMayanmarIndia,India, BangladeshBangladesh IndiaIndia PipelinesPipelines.. PartialPartial DecontrolDecontrol ofof gasgas pricingpricing byby GOIGOI
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Demand is highly price sensitiveDemand is highly price sensitive
GAS REQT. FOR POWER SECTOR BY THE YEAR 2012GAS REQT. FOR POWER SECTOR BY THE YEAR 2012
PRICE (PRICE (USD/MmbtuUSD/Mmbtu ) DEMAND () DEMAND (MMSCMD)MMSCMD)
3.3. ..
3.3. 4 .4 .
4.4. ..
FOR GAS TO SHOW A BREAK AWAY GROWTH
GAS PRICES AFFORDABILITY IS THE KEY ISSUE
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ELEMENTS OF GAS PRICINGELEMENTS OF GAS PRICING
Basic Price ,Basic Price ,
Custom Duties,Custom Duties,
Royalties,Royalties,
Transportation Charge,Transportation Charge,
Octroi, Entry tax, surcharge etcOctroi, Entry tax, surcharge etc
Servi
ce tax on Transportation.
Servi
ce tax on Transportation.
Sales TaxSales Tax
NEED FOR INTEGRATED FISCAL AND TAXATION POLICY
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ILLUSTRATION OF ELEMENTSILLUSTRATION OF ELEMENTS
OF APM GAS PRICEOF APM GAS PRICE
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Rajasthan Gujarat
Consu er price Tpt charges Royalty
S. Tax (Inter) Entry tax ServiceTax on TPT
Sales tax (Seller to Buyer) Turnover tax, surchargeetc.
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CUSTOM DUTYCUSTOM DUTY
PresentPresent ::
ApplicableApplicable onon importimport ofof NaturalNatural GasGas throughthrough transnationaltransnationalpipelinepipeline :: 1010%%
ApplicableApplicable onon ImportImport ofof LNGLNG:: 55%%
DesiredDesired ::
ItIt isis desireddesired thatthat CustomCustom dutyduty bebe waivedwaived offoff toto makemake itit helphelp ininachievingachieving competitivecompetitive visvis----visvis otherother fuelfuel forfor powerpower generationgeneration
ImpactImpact onon FCOGFCOG::
ReductionReduction inin FCOGFCOG onon ImportedImported NGNG byby aboutabout 88--99%%
ReductionReduction inin FCOGFCOG onon LNGLNG byby 33--44%%
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SALESTAX/VATSALESTAX/VAT
PresentPresent::
SalesSales tax/VATtax/VAT onon gasgas -- 44%% toto 1212%%,, aa wide wide variationvariation acrossacrossstatesstates..
MayMay hinderhinder uniformuniform growthgrowth ofof gasgas basedbased powerpower plantplant acrossacross
statesstates..O
neO
ne ofof thethe artificialartificial considerationconsideration byby investorsinvestors whilewhilesettingsetting upup thethe gasgas basedbased powerpower plantplant
DesiredDesired
MeritsMerits abolitionabolition ofof salessales taxtax andand tilltill itit isis abolished,abolished, maymay bebeclassifiedclassified asas declareddeclared goodsgoods toto havehave uniformuniform salessales tax/tax/ VAT@VAT@
44%%..
ImpactImpact onon FCOGFCOG::
ReductionReduction inin FCOGFCOG byby aboutabout 44%% toto 1212%% dependingdepending ononpresentpresent applicabilityapplicability ofofTaxTax..
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OCTROI, ENTRYTAXETCOCTROI, ENTRYTAXETC
PresentPresent:: SomeSome ofof thethe statesstates likelike Rajasthan,Rajasthan, UU..PP..,, imposeimpose EntryEntry TaxTax
artificiallyartificially increasingincreasing thethe gasgas pricesprices
LikewiseLikewise somesome ofof thethe statesstates levylevy turnoverturnover tax,tax, surchargesurcharge etcetchinderinghindering uniformityuniformity ofof gasgas sectorsector developmentdevelopment
DesiredDesired::UniformityUniformity desireddesired.. StatesStates shouldshould considerconsider notnot toto imposeimpose thesethesetaxes/dutiestaxes/duties forfor thethe sakesake ofof uniformuniform unhinderedunhindered developmentdevelopment
ofof gasgas sectorsector growthgrowth acrossacross thethe countrycountry..ImpactImpact onon FCOGFCOG::
ReductionReduction inin FCOGFCOG inin statesstates likelike UPUP wouldwould bebe byby aboutabout 44%%
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TRANSPORTATION CHARGETRANSPORTATION CHARGEPresentPresent::
DifferentDifferent TransportationTransportation modelsmodels PrevalentPrevalent inin thethe countrycountry.. NonNon--uniformuniform tarifftariff alongalongHVJHVJ pipelinepipeline bybyTransporterTransporter forfor NGNG
PostalPostal tarifftariff @@11501150/MCM/MCM forfor NaturalNatural gasgas ForFor RLNGRLNG (Rs(Rs 500500/MCM/MCM withinwithin Gujarat,Gujarat, RsRs 540540/MCM/MCM outsideoutside
GujaratGujarat uptoupto Vijaipur,Vijaipur, && RsRs 640640/MCM/MCM beyondbeyond Vijaipur)Vijaipur) DistanceDistance basedbased byby GSPLGSPL
DesiredDesired::
FixFix transportationtransportation TariffTariff onon costcost plusplus reasonablereasonable returtnreturtn
basisbasis .. NeedNeed forfor IntroductionIntroduction ofofCommonCommon carrier/carrier/ ContractContract carriercarrier
conceptconcept
OpenOpenAccessAccess onon NonNon DiscriminatoryDiscriminatory basisbasis
RegulatorRegulator toto OversseeOverssee thethe sectorsector
FosterFoster growthgrowth byby openingopening upup thethe sectorsector ..
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SERVICE TAX ONSERVICE TAX ON
TRANSPORTATIONTRANSPORTATIONPRESENTPRESENT::
1010%% onon transportationtransportation chargecharge..
DESIREDDESIRED::
ImpopsitonImpopsiton ofofServiceService taxtax bebe withdrawnwithdrawn
ImpactImpact onon FCOGFCOG::
ReductionReduction inin FCOGFCOG byby aboutabout 11--22..55%% dependingdepending uponuponactualactual costcost ofof gasgas andand thethe transportationtransportation chargecharge..
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OVERALL IMPACTOVERALL IMPACT
Exemption/rationalisationExemption/rationalisation inin duties,duties, taxes,taxes, levieslevies alongalongwith with transportationtransportation costcost (excluding(excluding royalty)royalty) asas aboveabovewouldwould resultresult intointo aa substantialsubstantial reductionreduction inin landedlanded pricepriceofof gas(gas( saysay aboutabout1515%%toto 3535%%))
ThisThis wouldwould gogo aa longlong wayway inin makingmaking itit competitivecompetitive visvis----visvis otherother availableavailable fuelfuel forfor powerpower generationgeneration
TheThe revenuerevenue lossloss byby wayway ofof reductionreduction inin taxestaxes etcetc.. maymaybebe mademade goodgood throughthrough increaseincrease inin incomeincome fromfrom
increasedincreased economiceconomic activityactivity
TAXATIONTAXATION POLICYPOLICY SHOULDSHOULD ALIGNALIGN WITHWITHGOIGOI POLICYPOLICY OFOF FOSTERINGFOSTERING NATURALNATURAL GASGASUSEUSE..
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GOVT. SUPPORT SOLICITED FORGOVT. SUPPORT SOLICITED FOR
INTEGRATED FISCAL AND TAXATIONINTEGRATED FISCAL AND TAXATION
POLICY: WAY FORWARDPOLICY: WAY FORWARD ToTo implementimplement aa comprehensivecomprehensive reformreform ofof thethe fiscalfiscal regimeregime forfor
naturalnatural gas/LNGgas/LNG inin lineline withwith GOIsGOIs planplan toto increaseincrease shareshare ofofGasGas basedbased powerpower generationgeneration,, andand toto reflectreflect itsits environmentalenvironmentalbenefitsbenefits throughthrough taxtax incentives/lowincentives/low levellevel ofof taxtax inin gas/LNGgas/LNGchainchain..
FiscalFiscal regimeregime forfor naturalnatural gasgas shouldshould lowerlower thethe overalloverall burdenburden ofoftaxationtaxation onon gasgas supplysupply chainchain inin orderorder toto promotepromote growthgrowth ofof gasgasrelativerelative toto otherother fuelsfuels (especially(especially coal)coal) inin powerpower sectorsector
SalesSales tax/VATtax/VAT shouldshould bebe setset atat zerozero oror atat aa nominalnominal levellevelreflectingreflecting thethe lowerlower emissionsemissions fromfrom gasgas..
TillTill thisthis isis achieved,achieved, naturalnatural gas/RLNGgas/RLNG maymay bebe classifiedclassified asasdeclareddeclared goodsgoods toto havehave uniformuniform levellevel ofof taxationtaxation acrossacross thethe statesstatesinin lineline withwith thethe CSTCST @@44%% onon coalcoal..
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GOVT. SUPPORT SOLICITED TAXATIONGOVT. SUPPORT SOLICITED TAXATION
POLICY: (CONTD.)POLICY: (CONTD.)
ToTo considerconsider removingremoving thethe customcustom dutyduty onon importsimports ofof LNG,LNG,TransnationalTransnational naturalnatural gasgas andand equipmentequipment && materialsmaterials usedused ininNG/LNGNG/LNG value value chain,chain, which which significantlysignificantly raiseraise thethe costcost ofofbuildingbuilding regasregas terminal,terminal, transmissiontransmission lineslines andand locallocal distributiondistributionnetworksnetworks..
BoostBoost investmentsinvestments intointo allall partsparts ofof thethe gas/LNGgas/LNG chain,chain, bybyexemptingexempting gasgas--relatedrelated investmentinvestment fromfrom taxationtaxation..
ProvideProvide incentiveincentive toto useuse gasgas forfor powerpower generationgeneration
ProvideProvide taxtax holidayholiday forfor allall projectsprojects inin gas/LNGgas/LNG chainchain includingincludingLNGLNG importimport andand regasregas facilityfacility..
EnsureEnsure priceprice affordability,affordability, reliabilityreliability andand competitivenesscompetitiveness withwithotherother fuelsfuels forfor powerpower generationgeneration byby way way ofof fiscalfiscal andand taxtaxreformsreforms..
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THANKYOUTHANKYOU
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