Commodity markets look for tax sops

Across major commodity groups, supply concerns have been triggering price rise this financial year.After a drought-like situation and then floods, the country saw food inflation touching an 11-year-high.

While the Union budget is expected to curb food inflation through initiatives such as introducing cold chain infrastructure, providing good seeds and extending crop insurance programmes, various commodity groups are seeking tax incentives to tackle availability concerns.

Crude oil

The country, which is mainly dependent on imports for oil and natural gas, is expected to focus more on exploration activities. Crude oil prices surged 64 per cent in 2009-10.

According to Tapan Trivedi, analyst with JRG Securities, the budget might reduce the taxes on the capital goods to increase production and exploration. “The government may also extend some tax benefits to international companies as well,” said Jayant Manglik, president at Religare Commodities. At present, oil exploration and production companies get a tax holiday for seven years from the year of commercial production. The industry wants the government to extend this to 10 years. The previous budget announced 100 per cent deduction allowed for capital expenditure on laying and operating across the country natural gas, crude or petroleum oil pipeline network for distribution including storage facilities. Benefit of tax holiday was extended to the private sector refineries engaged in refining of mineral oil between October 1, 1998 and March 31, 2012. The industry also wants deregulation of oil pricing to align with the international prices to narrow its under-recoveries, said Trivedi. The Kirit Parikh Committee, set up as per an announcement of the last budget, also had recommended freeing of auto fuel prices to ease the subsidy burden on the government.

Sugar

Sugar prices moved up by around 115 per cent for the past one year, much to the discomfort of the common man and the government. The Indian Sugar Mills Association (ISMA) has asked the government to withdraw 20 per cent levy— selling a fifth of their total output to state-run fair price shops at an average price of Rs 13.22 a kg from October 1. They also want the government to revoke the exemption of imported sugar from stock holding limits. The sugar industry is also hoping to get an extension for income tax exemption for cogeneration projects by another five years up to 31st March 2015.

source: mydigitalfc