Budget 2025: Oil and gas industry seeks relief on CNG, LPG subsidies, and GST inclusion
Brokerage reports indicate that the oil and gas sector expects relief in GST on fuels, Rs.35,000 crore LPG subsidy support, and a reduction in CNG excise duty from Budget 2025.
Cut in CNG Excise Duty: The government currently imposes a 14.4% excise duty on CNG on an ad-valorem basis, which adds about Rs.9.5 per kilogram to its price. Industry experts believe that reducing this duty could counteract the impact of the withdrawal of cheaper Administered Pricing Mechanism (APM) gas from the sector.
Subsidy for LPG Losses: Public sector oil marketing companies (OMCs) have been struggling with significant under-recoveries on subsidised LPG due to high global prices and capped domestic selling rates. Reports indicate that by the end of the first nine months of FY25, cumulative under-recoveries exceeded Rs.29,000 crore. To address this, the government is expected to allocate Rs.35,000 crore as subsidies, split into Rs.10,000 crore for FY25 and Rs.25,000 crore for FY26.
Special Excise Duty on Crude Oil: The Special Additional Excise Duty (SAED) on crude oil production, which was previously revoked when crude oil prices dropped below $75 per barrel, might return as global prices are now approaching $80 per barrel.
GST Inclusion for Oil Products: One of the industry’s top demands is the inclusion of petroleum products under the Goods and Services Tax (GST). The Confederation of Indian Industry (CII), in its budget memorandum, has recommended GST 2.0, suggesting that products like petrol, aviation turbine fuel (ATF), and natural gas be brought under the GST framework. However, state governments have resisted this move, citing potential revenue losses. While decisions on GST fall under the purview of the GST Council, any recommendation from the Finance Minister, who chairs the council, could influence the outcome.
