Sop drill

New Delhi, May 15: The Congress-led government is mulling tax sops for the exploration and production of both crude oil and natural gas, ahead of the next round of bidding for oil and gas blocks.

An inter-ministry meeting, where petroleum minister Murli Deora and finance minister P. Chidambaram were both present, has decided that the tax benefits on crude oil will continue, while a cabinet note will be brought to give the benefits to natural gas exploration and production.

However, since the issue of sops to gas is being heard in the courts, the finance ministry is against this relief.

Nevertheless, the ministries decided that the law ministry would go into this issue to see if gas gets the benefit. The petroleum ministry is keen on the benefit to gas as this will help it market better the oil and gas blocks to prospective bidders in the seventh round of the new exploration licensing policy.

Sources said the petroleum ministry was preparing a cabinet note for an income tax holiday for seven years from the start of commercial production to exploration and production firms. In its road shows to sell the oil and gas blocks, the petroleum ministry had promised prospective bidders the tax holiday.

The bidding for the oil and gas blocks was put off earlier this month to June 30, so that the government can clarify its position on the sop.

Analysts said frequent changes in the bidding dates and going back on the promises made would place the country in a bad light as India was competing against African and South American countries in marketing oil and gas blocks.

The government is offering 57 oil and gas blocks of which 39 are “recycled” blocks — those which found no bidders in the previous rounds or were relinquished by companies who did not find initial data encouraging.