The Cabinet Committee on Economic Affairs (CCEA) on Tuesday deferred a decision on an integrated LNG policy that is to provide for tax breaks for imported fuel.

"The finance ministry was not agreeable to some of the provisions in the policy," highly placed sources said.

The petroleum ministry had proposed infrastructure status to LNG projects giving the promoters a 10-year income tax holiday, zero customs duty on imported gas and lower sales tax on LNG from 24 per cent to 4 per cent throughout the country.

The integrated LNG policy had also proposed permitting 100 per cent foreign direct investment in the sector besides removing the ceiling on volumes a promoter can import or the price that a company can charge customers for the re-gasified LNG.

Sources said the finance ministry was against the proposal to give tax breaks to LNG.

Incidentally, the CCEA had in February postponed a decision on the policy saying the Union Budget for 2003-04 was to contain certain fiscal concessions.

But the Budget only reduced customs duty on LNG terminals from 25 to 5 per cent and did not address any of the demands for concessions sought in the policy.

The petroleum ministry anticipates a shortfall of 73 million standard cubic metres of gas per day at present and a likely shortfall of 100 million standard cubic metres of gas per day by 2005.

In another development, the CCEA approved raising Bharat Petroleum Corporation Ltd's equity in the 6-million tonne Bina refinery from 26 to 50 per cent.

The rest of the equity is to be garnered from financial institutions and the public.

Sources said the project was initially conceived to be a joint venture between BPCL and Oman Oil Company with each holding 26 per cent of the equity. However, Oman Oil Company later decided to limit its stake to around 4 per cent.

"It was felt that BPCL should build the refinery on its own and today the CCEA has given its nod for the same," they said.

The project comprises a single point mooring, a crude oil terminal, a sub-sea and onshore 935km crude oil pipeline from Vadinar in the Gulf of Kutch to Bina, and a six million tonne refinery for the production of fuels and lube base stock.

To be financed with a debt-equity ratio of 1.5:1, BPCL's equity contribution would be around Rs 1,440crore (Rs 14.4billion). The project is estimated to cost Rs 7,500crore (Rs 75billion).

So far, Rs 150crore (Rs 1.5billion) has been spent on the project.