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Govt to benefit from natural gas price hike

Govt to benefit from natural gas price hike

In a report, Goldman Sachs said the government would stand to gain Rs 14,900 crore by way of royalties and taxes from the incremental gas price accruing to state-owned producers ONGC and Oil India in 2014-15 fiscal.

The report said, “We note about 65 percent of incremental gas revenue from a price hike would flow back to the central and state governments as royalties, VAT, taxes and dividend, and calculate this amount to be Rs 14,900 crore in 2014-15,”. “This would be higher than the incremental fertiliser subsidy of Rs 14,600 crore,” the report added.

Of the gross incremental gas price of $4.70 (after including VAT), 50 cents would go towards payment of 12 percent VAT and other 38 cents in royalties to the central government.

After payment of VAT and royalty, net incremental gas price to ONGC or OIL would be $3.82, it said adding of the remaining $1.30 would go towards corporate tax and another $1 in dividend payments.

Net incremental accrual to ONGC or OIL would be $1.34 per mmBtu after considering 17 cents of dividend distribution tax, it said.

Goldman said gas price realisation for ONGC or OIL will reduce to $6-7 per mmBtu in case the government asks them to subsidise fertiliser production. $6-7 price is needed for ONGC’s deep water or marginal fields to be viable.

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