No New Taxes for Oil Companies Post New Legislation

Oil and gas companies in India will not be subjected to new taxes, including a windfall profits tax, following the enactment of a new law aimed at ensuring fiscal stability, as stated by Petroleum Minister Hardeep Singh Puri. The Oilfields (Regulation and Development) Bill, 2024, recently passed by the Indian Parliament, seeks to provide policy stability, decriminalize certain provisions, and promote ease of doing business in the oil and gas sector.

Puri highlighted the challenges of imposing new taxes under the new law, as it would breach the promise of fiscal stability, potentially leading to legal challenges. The bill is designed to attract investors by ensuring a stable fiscal environment, emphasizing that penalizing companies for high profits during periods of rising oil prices without compensation during low price periods often deters investment.

International Interest in India's Oil Sector

International oil majors have shown interest in investing in India, with Brazil's Petrobras in talks with Oil India Ltd for exploring the Andaman basins. Similarly, Oil and Natural Gas Corporation (ONGC) is discussing deep-water exploration collaborations with companies like ExxonMobil and Equinor.

Reforms to Boost Domestic Production

The newly passed legislation is part of the government's broader reform agenda to make crude oil and natural gas exploration and production more accessible. It introduces the concept of 'petroleum lease' and expands the definition of mineral oils to include various forms of hydrocarbons, aiming to raise domestic production and reduce the country's reliance on imports.

India currently imports over 85% of its crude oil and around half of its natural gas. With substantial untapped reserves, the country is looking to enhance energy security, affordability, and reduce import dependence through this reform, while also addressing energy transition challenges and promoting sustainable development.