Budget 2016: Revised cess policy, a token of gift for oil producers

India: Government of India announced its new budget which has resulted in some relief to indigenous oil and gas producers. A change in the cess policy has resulted in post-tax relief of USD3 per barrel, also promise of pricing premium and marketing freedom has boosted some confidence in investors too. The new policy of price premium and "calibrated marketing will now be applicable to all on stream projects irrespective of discovery date. This move has brought smiles to some of the oil producers while smallest cap players are not benefiting as much as its larger counterparts. While ONGC may get a post-tax benefit of INR 2,100, others such as Cairn are still struggling with their negative balance sheet.

TechSci Research depicts that with the Government’s move is to keep the interest of Oil producer’s high despite falling international crude oil prices. The new policy which is applicable to all ongoing and upcoming oil fields projects will catalyze the domestic production. Government’s decision of auctioning 69 idle oil and gas fields of state-owned ONGC and Oil India to private companies on new revenue sharing model is expected to boost oil and gas E&P over the next five years, which in turn would fuel growth in the country’s oilfield services market through 2020.

According to released report of TechSci Research “India Oilfield Services Market Forecast and Opportunities, 2020”, the country’s oilfield services market is projected to surpass US$ 7.8 billion by 2020, on account of anticipated increase in oil and gas E&P activities. Growing Indian economy and governments industrial growth friendly policy coupled with investor’s confidence, the Indian oilfield market is having potential growth opportunities.