Tax proposal to hurt India refineries - JPMorgan

03 March 2008 21:46  [Source: ICIS news]

MUMBAI (ICIS news)--India's budget proposal to withdraw the seven-year income tax holiday on units engaged in mineral oil refining would hurt refiners with projects beginning after March 2009, JPMorgan said on Monday.

“This is significantly negative for Hindustan Petroleum Corp Limited [HPCL], Bharat Petroleum Corp Limited [BPCL], Indian Oil Corp [IOC] and Essar Oil as this would change new refinery economics significantly,” the bank said.

HPCL’s Bhatinda refinery is scheduled for completion in September 2010, BPCL’s Bina refinery is scheduled in December 2009, IOC’s Paradip refinery is scheduled for 2012-2013 and Essar is working on an expansion of its refinery.

However, JP Morgan said there was still lack of clarity as the amendment says “mineral oil does not include petroleum and natural gas”, it added.

The import duty on naphtha for polymer production would increase to 5% from 0% and the excise duty on naphtha for fertilizers would be maintained at 0%, the bank said.

These excise duties would be marginally positive for refineries as the levy on naphtha increased duty protection for refiners, while Reliance Industries Limited (RIL) would be negatively impacted by this duty as it imports low-aromatic naphtha material for its polymer plant, JP Morgan added.

($1 = €0.66)

By: Isha Jha
+65 6780 4359

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