Bringing LNG under GST will improve affordability: Debasish Mishra, Deloitte India

Government is addressing the infrastructure availability issue in oil and gas sector but the affordability problem still remains, says Debasish Mishra, Partner, Deloitte India. Excerpst from a interview with ETNOW.

How will bringing LNG under GST impact the sector and when do you see that happen?
The industry has been demanding GST for the last two years, but the states earn a lot of revenue from the oil and gas sector. They have always been reluctant to include oil and gas in the GST regime. The news reports and the honourable minister mentioned that $60 billion worth of investment is lined up for the gas segment alone and that includes trunk pipelines like the Urja Ganga and LPG projects. He also mentioned that 70% of the population will be covered with the City Gas distribution network. The challenge in natural gas consumption has been that of availability and affordability. With this infrastructure in place, the government is addressing the infrastructure availability issue but the affordability problem still remains. So, in the GST regime, the complexity of taxation will come down and the affordability will increase which will help increasing consumption of natural gas.

How do you see the government's move of BPCL disinvestment and it being open to the idea of getting strategic investor in HPCL? Do you think that the way oil marketing companies are valued in India will go through a big change if the government goes in this direction further?
We would not comment on the valuations of individual companies but it is for ONGC to decide what course of action to take because they are officially the promoters of HPCL. They have to decide whether to create synergies among two companies because both the companies have petrochemical asset refinery ownership. ONGC will soon be producing domestic gas from the KG Basin and the HPCL has a retail network to dispense it. So, there are synergistic opportunities and ONGC can decide as owners what to do with the future of HPCL. Certainly, this space has been witnessing lot of action because of all this policy decisions being taken and these companies are in the news right now.

Do you think there is enough appetite from global players as well as investors to invest in Indian oil and gas space and which are their areas of interest?
Market potential is attracting all the attention. The projections today, whether it is IEA's outlook or British Petroleum’s, show that India’s energy demand will be growing in excess of 4.5% in the next two decades, which is far exceeding the rest of the world. It will probably be on the one of the highest in the world. The world energy demand in the corresponding period, however, will grow flat at 1%, hence there is tremendous interest in midstream and downstream companies in terms of investment opportunities in India. For example, invesments like the massive Rosneft investment in Essar oil which is midstream and downstream, Total-Adani deal which is related to downstream, either oil retailing or gas retailing, will always have investor interest. This is a good hedge for global investors who are indexed on the upstream side, given the volatility of the oil prices and outlook of oil going forward.