Energy Sector Calls for Tax Reforms to Boost Domestic Production and Adoption of Smart Meters and Gas

Jaipur, Rajasthan, 2026-01-29 — /EPR Network/ — As India approaches the Union Budget 2026–27, the stakeholders in the energy sector have demanded a set of fiscal and regulatory measures expected to boost local production, speed up the implementation of smart metering, and increase natural gas usage. Industry participants believe that targeted tax rationalisation and policy support could play a key role in efficient performance, lowering expenses, and aligning with the long-term energy change objectives of the country.

India continues to be heavily dependent on imports, as the country imports more than 80 percent of its crude oil needs. As the energy demand is set to grow consistently in the next few years, the industry believes that Budget 2026 has been an important opportunity to resolve the structural issues and to spur investment in upstream, midstream, and downstream sectors.

One of the key requirements by the stakeholders in the industry is that crude oil and natural gas should be incorporated into the Goods and Services Tax (GST) system, at least with lower rates. According to industry observers, the introduction of these products under GST would ensure a smooth flow of input tax credits, reduce cascading taxes, and simplify compliance, thereby improving ease of doing business in the entire energy value chain.

There have also been concerns with the latest GST rate increment on oilfield equipment and services, which has been changed to 18 percent from 12 percent. The increase in taxation pushed up the cost of the project, specifically in exploration and production projects where capital investment is required and the gestation period is minimal.

In addition to upstream concerns, the oil marketing companies are also likely to demand compensation for under-recoveries in the sale of domestic liquefied petroleum gas (LPG). Although there is periodic government assistance, under-recoveries are still high, and timely compensation is regarded as being crucial to make the fuel retailers financially stable while maintaining affordable access to cooking fuel for households.

Alongside conventional energy reforms, the adoption of smart meters has emerged as a key area of focus in the run-up to Budget 2026. Smart metering is progressively considered as a key enabler of efficiency, transparency and improved demand management in the power industry. Smart meters are also likely to enable the distribution companies to minimize losses, enhance billing accuracy, and consumer awareness through the provision of real-time consumption and reduction in manual intervention.

The industry players feel that favourable tax policies and incentives would help in the faster implementation of smart meters, especially in the city and semi-urban regions. The increased use of digital solutions for metering also coincides with the broader governance and digital infrastructure reforms to enhance the accountability and operational efficiency of the power sector.

At the same time, stakeholders are also pushing the government to provide more policy backing for the use of natural gas as a cleaner and more efficient fuel. One of the important demands is the status of infrastructures given to the natural gas projects, as they would enhance the access to long-term financing options and lower the cost of borrowing by the pipelines, liquefied natural gas terminals and city gas distribution networks. These actions will help achieve the aim of the government to promote the proportion of gas in India’s energy mix.

Tax relief has also been sought for pipeline construction materials, compressed natural gas (CNG), and biogas, along with the removal of the existing customs duty on liquefied natural gas imports.

Lower input costs, industry participants argue, would make gas more competitive and encourage wider adoption across industrial, commercial, and household segments. Industry players assert that lower input costs would make gas more competitive, be more widely adopted, and used in all the industrial, commercial, and domestic segments.

Upstream operators have made renewed calls for the reduction of cess on crude oil, the tax holidays on the new exploration blocks, and the exclusion of exploration operations from GST. The sector is currently managed under different contractual patterns, which have different royalty and cess arrangements. It is perceived that harmonisation of these frameworks will make compliance more complex and level the playing field of investment.

The industry has also proposed the possibility of the establishment of a special petroleum financing fund to be applied to renewable energy and other capital-intensive industries. Such a fund could leverage existing cess collections to support exploration, technology upgrades, and domestic production, which were to be financed by the local and national resources together.

In a bid to enforce cleaner household power options, stakeholders have emphasized the requirement to urge consumers to move away from LPG cylinders to piped natural gas connections. Yashraj Khaitan, Founder and CEO, Polaris Smart Metering, said, “We recommend that the same incentives given today to customers for LPG cylinders should be extended to customers adopting piped gas connections from CGD companies. This will help the government eliminate long term expenditure on LPG cylinders and transition customers to a hassle-free and more cost-effective solution.”

Analysts observe that the problem can be tackled by aligning fiscal incentives with the adoption of technology like smarter meters and piped gas, which would facilitate a reduction in subsidy payments and better efficiency and service delivery. As energy security, affordability and sustainability are becoming new priorities, Budget 2026 is broadly regarded as a turning point in the reforms to promote domestic production and energy infrastructure modernisation.

Overall, the energy sector suggests that the balanced strategy of rationalisation of taxes and investments in infrastructure and the use of technology may assist in enhancing the energy system in India, decreasing the level of dependency on imports, and promoting the growth of the economy in the long term.