The Budget has not been so positive for the oil & gas sector. Although, the Budget proposes to reinstate the tax holiday on production of natural gas, the benefit of the same is restricted only for blocks proposed to be offered under the NELP - VIII round.  Hence, no tax holiday on gas production may be available in respect of blocks that have been offered in the earlier rounds of bidding.  

For the midstream sector, the tax holiday for cross-country natural gas distribution network, which was inserted in 2007, is proposed to be withdrawn. Instead, the Budget proposes an investment linked tax incentive for natural gas distribution network including crude / petroleum oil pipeline network.

For the downstream sector, the tax holiday for refining activity has been restored for all refineries commencing production up to 31 March 2012.

To augment the popularity of bio-diesel, diesel blended bio-diesel has been granted an excise duty exemption, and basic customs duty on bio-diesel has been reduced to a third of its current rate of 7.5 per cent.