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Published:Monday, February 03, 2020 6:20 PM

Oil & Gas: Budget Highlights, 2020-21

 Oil & Gas: Budget Highlights, 2020-21

India is the fifth-largest economy of the world. India’s foreign direct investment got elevated to the level of US$ 284 billion during 2014-19 from US$ 190 billion that came in during the years 2009-14. The total budget estimated at Rs. 2020926 Crore for 2020-21 which has increased by Rs 170826 Crore as compared to 2019-20.

 
       1) Budget Allocation for Oil and Gas 2020-21
    The oil and gas sector holds 1.41% of the total budget that is Rs. 42901 Crore for 2020-21 which is decreased by .09% compared to the last year. No major changes have been made in the total budget; allocations have witnessed change as per the government priorities. A major part of the budget has been allocated to the LPG subsidy that is 37256.21 Cr which is increased by 9.3% and Kerosene subsidy holds 3659 Cr which is decreased by 22.5% as compared with the last year budget.
 
 
      2)   Major Announcements by Govt for Oil & Gas Industry, 2020-21
 
  • To facilitate better price discovery of domestically produced natural gas, the government plans to undertake further reforms to make natural gas pricing more transparent.
  • National gas grid will be expanded to 27,000 KM from 16,200 KM currently.
  • The budget has proposed a capital outlay of Rs 98,522 crore for oil and gas companies for 2020-21, a 4% increase over the revised estimate for 2019-20.
  • Government has launched OALP Bid Round-Vin 2020 offering 11 Blocks for Exploration and Development through International Competitive Bidding covering 19,789 Sq. Km of area 8 Blocks are On land type, 2 Blocks are Shallow Water type and 1Block is Ultra Deep-Water type.
  • To spend Rs 102 lakh crore ($1.4 trillion) in the infrastructure sector over a five-year period (2020-25) Under National Infrastructure Pipeline Vision 2025 project. The 24% of total amount that is 24,54,249 is expected to be invested in energy sector. Major components of Infrastructure Vision 2025 are Affordable and clean energy, Ensuring 24×7 power availability, Reduce pollution through green and clean renewable energy and environment friendly fuel for transportation.
 
      3)  Investment in Public Enterprises, 2020-21
 
  • The Exploration and Production (E&P) segment’s overall capital outlay is seen increasing 7.40 per cent to Rs 52,019 crore in 2020-21 from Rs 48,431 crore in the Revised Estimate for current fiscal.
  • The Refining and Marketing segment has witnessed a 2.49 per cent decline in capital outlay at Rs 41,654 crore as compared to the revised estimate of Rs 42,722 crore for 2019-20.
  • The petrochemical sector has also witnessed an increase in capital outlay at Rs 4,754 crore, a 31 per cent jump over Rs 3,621 crore likely to be spent this fiscal year ending March 2020.
  • The capital outlay for Oil and Natural Gas Corporation (ONGC), the biggest spender among oil and gas Public Sector Undertakings (PSUs), increased 2 per cent to Rs 32,502 crore for 2020-21 from Rs 31,896 crore likely to be spent this fiscal.
  • For Indian Oil Corporation (IOC), the country’s largest fuel retailer and the second-biggest spender among oil and gas PSUs, capital outlay is budgeted to increase to Rs 26,233 crore in 2020-21 from the revised estimate of Rs 24,895 crore for current fiscal. Also, the capital outlay for Hindustan Petroleum Corp (HPCL) has been flat at Rs 11,500 crore for 2020-21.
  • The government has also budgeted for a 14 per cent increase in the capital outlay for Bharat Petroleum Corp (BPCL) at Rs 9,000 crore in the next financial year, as against the revised estimate of expenditure at Rs 7,900 crore fo 2019-20.
  • Capital expenditure by Oil India Ltd (OIL), the second-largest state-owned petroleum explorer, has been pegged at Rs 3,877 crore for FY21, a 5.4 per cent increase.
  • Similarly, GAIL India Ltd, the state-run natural gas utility, is expected to spend Rs 5,412 crore, a marginal increase over Rs 5,381 crore to be spent in the current fiscal.
  
       A) Exploration and Production: 52,019 crores
 

 
       B) Refinery and Marketing Sector: 41653.58 Crore
 
 
       C) Petrochemical Sector+ Engineering Sector: 4754.48 Crore+ 95 Crore
 

 
Way Forward/Infraline Views:
 
  • Budget 2020-21 indicates that the government of India is focusing on the shift towards a natural gas-based economy in the coming years. 
  • The development of natural gas infrastructure and improvement in the current pricing mechanism will help the government to increase the natural gas share in the energy mix from 6.5% to 15% in the coming years.
  • The development of pipelines will impact the CGD business segment positively & expected to witness momentous growth in the coming years.
  • A major part of the budget has allocated to the LPG subsidy to increase the consumption of gas as the primary source of energy in the rural areas as well.
  • Major points that are missing from the budgets as per the industry expectations are the Bio-fuels, petroleum products under GST, OID cess & tax exemptions.

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