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Comment of Mr. Suresh Mathur, Essar Group, New Delhi on Union Budget proposal
February 28, 2006    

Oil Industry & Budget
Since Hon'ble Finance Minister started his budget speech with soaring international oil prices as a major factor in the state of health of the economy, the petroleum industry deserved a serious focus in government's budget policies. This, unfortunately, has not happened and some serious issues, like subsidies, have not been addressed.
Recommendations of the Rangarajan committee also find no place in the budget speech in order to address the crisis facing the industry. Increase in cess in crude processing from Rs.1800 per ton to Rs.2500 per ton will prove negative for crude processors.
New Oil Blocks For NELP-6: Welcome
On the positive side, the government's decision to increase the number of oil blocks to 56 for NELP-6 is encouraging for future oil and gas discoveries in the country. The FM's announcement about giving some incentives for refineries and pipe lines is welcome.
The industry will wait for details of the policy with eagerness.
Comment of Mr. A K Srivastava, Managing Director, Essar Power on Union Budget proposal
Government has given a thrust to power generation/transmission/distribution which is a welcome step. However industry was expecting reduction in customs duty on power plant equipment other than mega power projects has not been provided. Increase of MAT from 7.5% to 10% would affect the profitability of power companies.
Comments of Mr. A R Ramakrishnan, Chief operating Officer, Essar Shipping on
Union Budget proposal for shipping industry
Positive
· Fringe benefit tax will come down on account of (a) special concession to shipping industry with regard to hospitality and boarding and lodging expenses and (b) due to the lowering of rate with regard to tour and travel expenses
Negative
· Industry was expecting complete exemption from service tax with regard to foreign input services. Or at least clarity with regard to foreign dry-docking services. There is no such exemption in the budget. This will affect substantially the input cost.
· Rate of tax increased to 12% from 10%. Effective cost of input services will go up.
· Hike in MAT tax rate to 10% from 7.5 % will hamper the industry with regard to non tonnage income like book profit on sale of ships
· Ship management services have been brought under service tax. This will affect the auxiliary services of shipping industry.
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