Bharti Airtel faces Rs1,067 crore TDS demand related to global operations

The international taxation unit of the I-T department has held that such payments are in nature of fee for technical services and are subjected to TDS deductions as per section 195 of the I-T Act

New Delhi: The Income Tax (I-T) Department has slapped a Rs1,067 crore demand notice on telecom giant Bharti Airtel for non-payment of TDS (tax deducted at source) dues in the last four financial years in connection with its overseas operations, even as the company said it was fully compliant with all the provisions, reports PTI.

The department has asked the company to pay a total tax of Rs1,067.24 crore under Sections 201 (consequences of failure to deduct or pay taxes) along with Section 195 (any person responsible for paying to a non-resident) of the I-T Act.

“Bharti Airtel is fully compliant on all applicable income tax provisions. This demand notice, pertaining to applicability of withholding tax on payments made to international operators, is not justified and we will take appropriate legal recourse,” a company spokesperson said.

The payments, which the department said are to be made immediately, are for four financial years—2007-08 (Rs202.07 crore), 2008-09 (Rs329.913), 2009-10 (Rs313.577 crore) and 2010-11 (Rs221.681 crore) in lieu of payments made by the company to “non-resident mobile service providers”.

The international taxation unit of the department has, according to sources, held that such payments are in nature of fee for technical services and are subjected to TDS deductions as per section 195 of the I-T Act.

The department, in its notice, also said that for payments of such taxes, the location of the company's property or place of conducting the operations is not ‘relevant’.

Bharti Airtel offers a variety of telecom services both in India as well abroad.

The company claims to have a subscriber base of over 230 million across 19 countries.

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Cairn receives govt nod to start of production from Bhagyam oilfield

Cairn, which was recently taken over by London-based mining group Vedanta, will begin oil production from Bhagyam at the level of 20,000-25,000 barrels per day (bpd) sometime this month and it will reach the approved peak output of 40,000 bpd later this year, an oil ministry official said

New Delhi: After months of delay, the government has given Cairn India the go-ahead for commencement of production from the Bhagyam oilfield, the second-largest find in the exploration firm's prolific Rajasthan block, reports PTI.

Cairn, which was recently taken over by London-based mining group Vedanta, will begin oil production from Bhagyam at the level of 20,000-25,000 barrels per day (bpd) sometime this month and it will reach the approved peak output of 40,000 bpd later this year, an oil ministry official said.

The block oversight committee has approved production of 25,000 bpd from Bhagyam oilfield.

“The Management Committee (MC), which comprises representatives of the oil ministry and its technical advisor, the Directorate General of Hydrocarbons (DGH), approved the start-up of production,” he said.

Oil and Natural Gas Corporation (ONGC), which holds a 30% stake in the Rajasthan block, had asked for third-party certification to ascertain if Cairn’s production plan will prudently exploit the reserves and if the surface facilities are capable of handling oil and water from the field.

The official said third-party certification endorsing the production plan came a few weeks back, after which ONGC gave its go-ahead for commencement of production.

Prior to this, DGH had approved the production plan, he said, adding that the FY11-12 production rate, work programme and budget for the Bhagyam field have also been approved by the block oversight committee.

Currently, Mangala—the biggest of the 18 oil discoveries in the Thar desert block—is producing 125,000 bpd, but it can produce 150,000 bpd within a few days from MC approval.

Bhagyam, too, has the potential for output to go up to 60,000 bpd, sources said, adding that the Rajasthan block would have an output of close to 175,000 bpd by the end of the current fiscal.

Cairn, which is the operator of the Rajasthan block with a 70% stake, was ready to pump oil from Bhagyam in October, but delayed the production in the absence of regulatory approvals.

So far, the company has committed more than $250 million toward development of Bhagyam against the approved Field Development Plan estimate of $470 million.

Approvals for the Bhagyam field were delayed because of a dispute over payment of royalty and oil cess with partner ONGC.

But now that UK’s Cairn Energy—which sold 40% of its stake in the Indian unit to Vedanta—and the Anil Agarwal-led firm have agreed that Cairn India will share royalty and pay cess on its 70% share in the block, the approvals have started flowing.

Sources said the Rajasthan block has the potential to produce 300,000 bpd, a quarter more than the previously projected peak output.

Besides enhanced output of 150,000 bpd from Mangala and 60,000 bpd from Bhagyam, the expected contribution from the Aishwariya field has been revised upward to 25,000 bpd, compared to 10,000 bpd previously estimated.

The other fields in the block can produce 65,000 bpd.

Sources said the Bhagyam field is ready to start production, while output from Aishwariya will begin later in 2012.

At present, the approved peak output from Rajasthan is just 175,000 bpd—made up of 125,000 bpd from Mangala, 40,000 bpd from Bhagyam and 10,000 bpd from Aishwariya.

For the new peak, the government needs to approve field development and investment plans along with the extension of exploration activities over the rest of the block.

Cairn India holds 70% participating interest in the block and state-owned ONGC the remaining 30%.

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Oil ministry proposes key changes in natural gas allocation policy

In a note to the EGoM headed by finance minister Pranab Mukherjee, the oil ministry has proposed to stop gas supplies to power producers that do not sell electricity at regulated tariff. Also, future gas allocations are to be made only to urea fertiliser plants and fuel allocation to phosphates and potassium fertiliser producers be stopped

New Delhi: The oil ministry has suggested key changes in the natural gas allocation policy in the view of sharp drop in output from Reliance Industries’ eastern offshore KG-D6 block, reports PTI.

In a note to the Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee, the ministry has proposed to stop gas supplies to power producers that do not sell electricity at regulated tariff.

Also, future gas allocations are to be made only to urea fertiliser plants and fuel allocation to phosphates and potassium fertiliser producers be stopped.

The ministry has also proposed to revise the priority attached to city gas distribution (CGD) networks and place them next to fertiliser and stranded assets of power sectors and before the new demands of fertiliser and power sector.

Oil minister S Jaipal Reddy said it is for the EGoM to take a decision on these so that scarce domestic natural gas is available only for core sectors.

KG-D6 gas output has fallen to below 39 million metric standard cubic meters per day (mmscmd) after touching peak of 60 mmscmd in March 2010, prompting the ministry to suggest changes in the allocation policy.

Mr Reddy, who got a first hand account of problems being faced by power producers when corporate leaders, including Anil Ambani of Reliance Power and Ashok Hinduja of the Hinduja Group briefed him about the fuel shortages, said no dates for the EGoM have been fixed yet.

“They (power producers) explained the various aspects of problem which they are facing. I have already circulated a note for EGoM and these aspects will be brought before the EGoM,” he said.

Power producers wanted priority allocation of natural gas to meet the energy deficit in the country.

“Decision will be taken at the EGoM. Until EGoM meets, I cannot comment on their demands,” Mr Reddy said.

His ministry’s agenda for EGoM recommends that “future gas allocations be made only to urea fertiliser plants” as gas allocation to urea has been accorded top priority. It says that supplies to phosphates and potassium fertiliser producers be stopped since the government pays them a fixed subsidy and “cheaper input gas does not lead to lower subsidy burden on the government”.

It wants the EGoM to approve that “all existing and future allocations of NELP gas for power plants will be subject to the condition that the entire electricity produced from allocated gas shall only be sold to the distribution licensees at tariffs determined (or adopted) by the tariff regulator.”

Natural production from KG-D6 has fallen to less than 39 mmscmd from the 61.5 mmscmd peak in March 2010. The output is far short of the 70.39 mmscmd forecast in the Field Development Plan approved in 2006.

The fall forced the oil ministry to first apply a pro-rata cut in supplies to all consumers in July 2010 and with further dip in output it restricted supplies to only core sectors of fertiliser, LPG and power.

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