Oil & gas: Budget 2017-18 wish list

Budget 2017-18

Industry size: Third largest consumer of crude oil and petroleum products in the world and second largest refiner in Asia. FDI inflows into the sector totalled $6.7 billion in FY16  

- Employment figures:  

1. Total manpower employed in oil and gas sector CPSEs at 110,675 (as on March 31, 2016) has been almost stagnant over the years

 2. Exploration & production vertical accounted for the highest manpower deployment (30%) followed by marketing (28%) and refinery (23%) as on March 31, 2016

 3. Executive/Managerial categories employed the highest proportion of manpower (54%) followed by Workmen (31%), Supervisory (9%) and Clerical (6%) accounted for the balance during 2015-16

 4. ONGC and IOCL in 2015-16 together accounted for about 60% of the total manpower employed in the oil & gasCPSEs

- GDP contribution: The natural gas and petroleum sector, which is inclusive of refining, transportation, and marketing of these products, contributes about 15% to India's GDP

Key issues or areas of concern for the sector:

a) While Hybrid Annuity Model (HAM) under PPP has brought back the interest of private sector developers to some extent, financial closure of many projects are delayed due to lack of experience and lack of strong Balance Sheet of some players in Indian highways PPP sector. The procurement process needs to be strengthened

b) While some stalled projects are restarted, stress on current loan outstanding to highway sector continues to remain. As a result, banks are cautious in lending fresh loan to the developers 

c) Despite efforts made to encourage Insurance and Pension Fund to finance roads & highways sector, these institutions have not been able to step up financing to this sector. It would be important to bring these ideal financiers into financing stream for roads and highways

Industry ask:

a) The amount stuck in arbitration award (in favour of developer) should be released without further delay to ease the stress on the sector

b) An Independent Regulator is required for this sector to deal with unanticipated issues arising during the long concession period

PwC point of view: Deepak Mahurkar, Leader Oil & Gas, PwC

- Union Budget has an opportunity to bring into practice the principles of Maximum Governance, Minimum Government and Ease of Doing Business by objectively removing anomalies and dated government controls in E&P and downstream 

- Take proactive steps to reduce burden of imperfect GST applicability to the sector

- Unleash smart investment in downstream infrastructure in fuels, feedstocks supplies

- Participate in meeting neighbouring and regional countries demand growth

Sudhir Mathur, Acting CEO, Cairn India Limited:

"Cairn India remains committed to the Prime Minister's vision of reducing import dependence for energy by 10 per cent by 2022. It is imperative to boost investments in the Oil & Gas sector. Globally, given the low oil price scenario, Governments have provided incentives to stimulate and attract investments. The upstream sector in India looks forward to a reduced Cess of 8% from existing 20%, as this will help increase domestic crude production and encourage further investment in the sector, that is critical for India"Click here