Budget Analysis – Union Budget 2020-21


Budget Analysis – Union Budget 2020-21

The Federation of Indian Petroleum Industry (FIPI) organized its flagship Budget Analysis Session, in association with Deloitte as the knowledge partner, on Monday, 3rd February, 2020 at Hotel Hyatt Regency, New Delhi. The objective of the session was to analyse the recently presented Union Budget 2020-21 and weigh the impact of the Budget with respect to Indian oil and gas industry. The session was attended by senior dignitaries from oil and gas companies and key government representatives namely Mr. Yogendra Garg, GST Commissioner, Mr. Y.G. Parande, Former member, CBIC.

Welcoming the dignitaries, Mr. Rajiv Bahl, Director (Finance, Taxation and Legal), FIPI, gave an insight into the GST study recently concluded and submitted by FIPI to the government. He stated that we have come a long way in taking up this issue with the Government and will now take the advocacy further with Minister of Finance and GST council.

Dr R K Malhotra, Director General, FIPI, in his opening remarks, spoke about some of the key positives in terms of infrastructure developments plans for expansion of gas pipeline up to 27,000 kms from the present 16,200 kms and pricing reforms for natural gas with improved transparency. Dr. Malhotra said that, the budget has been prepared to strike a balance between the government expenditure and fiscal deficit. He said FIPI is still pursuing the government on issues such as OID cess and inclusion of five petroleum products under the ambit of GST and thanked the industry members for their continued support.

Setting the context for the session, Mr. Rakesh Alshi, Tax Partner, Deloitte made presentation on the key takeaways of the budget 2020-21 and Oil & Gas Outlook prepared by Deloitte. Mr. Alshi, in his opening remark said that, through this budget, fundamental changes have been attempted to encourage spending over saving. When speaking about the direct taxes, Mr. Alshi pointed out that removal of Dividend Distribution Tax is a welcome step and this could push up foreign investments. All foreign companies would be able to save 20% of their cash flow and it is a big move in ease of doing business. Speaking on Oil & Gas outlook, he further added that rise in crude oil supply from US, Brazil and Canada is likely to increase the supply despite the decrease in demand. With oil market facing uncertainties, rise in renewables, carbon consciousness, emission reduction are seen as disruptive trends. Ms. Bela Sheth Mao, Tax Partner, Deloitte highlighted the provisions made under the indirect tax.

The main highlight of the session was the ‘Panel Discussion on Hits & Misses of Union Budget 2020-21, focusing on the outcome for oil and gas companies on the new budget. The panel comprised of Mr. Yogendra Garg, GST Commissioner, Mr. Subhash Kumar, Director (Finance) ONGC, Mr. Sandeep Kumar Gupta, Director (Finance), IOCL, Mr. A K Tiwari, Director (Finance), GAIL, Mr. Kartikeya Dubey, Director (Finance) & Vice President (Tax), BP India, and Mr. Vivek Rathi, Deputy Chief Financial Officer, Cairn Oil & Gas, Vedanta Ltd. The panel discussion was moderated by Ms. Bela Sheth Mao, Tax Partner, Deloitte

During the course of the discussions, it was highlighted that the few budget announcements can increase the demand for oil & gas. The panel felt that, while the budget has less relevance to the oil & gas industry, they found some key positive outcomes like infrastructure development, funding for pipeline projects, transparent mechanism for gas and phasing out of older power plants. This could increase the demand for cleaner fuel. The panel had a common consensus for inclusion of all petroleum products under GST. Replying to the request made by the other panel members, Mr. Yogendra Gar, GST commissioner told that GST council is working on making changes and amendments to the GST system to make it simpler. When asked about inclusion of Natural Gas & ATF under the ambit of GST, Mr. Garg told that the call has to be made by GST council and it needs more stability in terms of revenue and this will happen with the development of City Gas Distribution networks as gas demand will spread evenly across the country. Panelists also sought the removal of OID cess, as it is affecting their profit before tax. Acknowledging the issue, Mr. Garg said that the GST council is working on the issue and would suitably address the concerns of the oil industry at an appropriate time.

Delivering the closing remarks at the session, Mr. Parande mentioned that government must shift the focus from target revenue to tax gap analysis. He further said that, it is important to make realistic and reliable estimates for revenue generation, since making unrealistic revenue forecast could further impact the budget deficit. In his final comments, he said there must be a balance for the domestic industry against unfair competition, with stability and clear path for the future.

The Budget Analysis was attended by senior executives from the oil and gas industry and as in the past, was a highly successful event.

Click here for the presentation