The Budget proposals presented by Finance Minister Nirmala Sitharaman in Parliament on Saturday has exempted tax on any income accruing or arising to the ISPRL as a result of an arrangement for replenishment of crude oil stored in its storage facility in pursuance to directions of the Central Government. The exemption has been extended by inserting a new clause in section 10 of the Finance Bill 2020.
The move is expected to provide relief to the ISPRL that has been tasked to build strategic oil reserves facility with 90-100 days stock to shield the country from supply disruptions coming from perennial political risk in the prime oil supplying countries in the Middle East and Africa. ISPRL is a wholly-owned subsidiary of the Oil Industry Development Board under the Oil Ministry.
India currently has operational 5.33 million tones underground strategic reserve facility at Vishakhapatnam, Mangaluru and Padur, while another 6.5 mt facility is coming up at Padur in Karnataka and Chandikhole in Jajpur. Work on two more facilities at Bikaner in Rajasthan and Rajkot in Gujarat would be initiated soon. When complete, these would hold enough oil to meet over a month of domestic requirements.
In addition, the Oil Ministry has asked the ISPRL to identify new sites so that storage facility for 90-100 days stock of oil ready in the country at all times.
This would enable the country to meet the requirement during any crisis as India imports more than 80 per cent of its crude requirements. It would also come to rescue of consuming sectors in time volatility in oil markers.
At present, the government gives tax exemption to overseas companies that generate income on storage and sale of their crude kept in Indian strategic reserves. This benefit was not exempted to the ISPRL so far.
The budget has proposed that tax exemption to ISPRL will be given on the condition that its exemption shall be subject to the condition that the crude oil is replenished in the storage facility within three years from the end of the financial year in which the crude oil was removed from the storage facility for the first time.
The amendment will take effect from April 1, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
( With inputs from IANS )