As the Union Budget approaches, the oil and gas industry anticipates government allocation of funds for energy transition and the implementation of reforms to encourage natural gas consumption. Finance Minister Nirmala Sitharaman is scheduled to present Budget 2024 on February 1, with industry stakeholders eagerly awaiting comments on the long-standing demand for the inclusion of petroleum products under the Goods and Services Tax (GST) regime. Sitharaman has tempered expectations, signaling no extravagant announcements due to the impending presentation of the full budget for FY25 after the formation of a new government following the general elections in April-May 2024.

Expectations within the industry revolve around a potential focus on energy transition and net zero-emissions targets for oil Public Sector Undertakings (PSUs). In the previous Union Budget for FY24, Sitharaman allocated Rs 30,000 crore for capital investments in energy transition and outlined net zero-emission objectives for state-owned oil marketing companies (OMCs). However, the allocated amount has not yet been distributed to the OMCs, prompting concerns about potential lower allocations for oil PSUs in the upcoming budget.

Experts, such as Suman Chowdhury, Chief Economist and Head of Research at Acuite Ratings & Research, anticipate a reduction in government funds for oil PSUs. Oil companies like IOCL and BPCL have announced rights issues, and while the government is expected to contribute, the amount is likely to be less than the budgeted figure to maintain fiscal deficit control.

Global tax consultancy and audit firm Deloitte predicts a redirection of government expenses toward improving the energy sector, particularly in green and sustainable energy initiatives. Deloitte emphasizes the need for a budget focusing on transitioning from carbon-dependent to energy-efficient policies, suggesting that incentivizing investment in green bonds and renewable energy businesses will aid India in achieving net zero-emission targets by 2070 and meeting 50% of energy requirements from renewable sources by 2030.

Furthermore, the industry expresses hope that the budget might introduce reforms for city gas distribution (CGD) players to enhance natural gas consumption. Kapil Garg, Founder and Promoter of Oilmax Energy Pvt Ltd, suggests the possibility of incentive structures for CGD players to improve project viability and execution.