Even more than other sectors, the oil and gas industry is worried about slipping on the minimum alternate tax, which is expected to snatch away most of the gains it gets from a seven-year tax holiday on natural gas exploration and production.

The tax holiday in new oil and gas blocks that are going to be auctioned soon was widely anticipated by the industry, being part of the eighth round of new exploration licensing policy or NELP.

But the increase in MAT size from 10 per cent to 15 per cent has left the industry depressed, especially as there was no word about price deregulation in finance minister Pranab Mukherjee's budget.

Oil companies are in a flux, as not only is there no clear policy on pricing reforms, but there is no provision for oil bonds.

The budget provides for a total subsidy of Rs1,11,276 crore, which include food and fertiliser subsidy as well. This is below the total subsidy (including bonds) of Rs2,19,582 crore in 2008-09. It is still unclear as to how the subsidy burden would be met if prices continue to be mandated at artificially low levels.

Still, the clarification on the tax holiday for future gas producers - who will now enjoy the same tax rebate as crude oil producers from the eighth round of NELP bidding – will help clear the air and also encourage oil and gas firms to invest in India. But as this holiday is only for future investments, existing firms may be at a disadvantage.