New Delhi, June 29 : British Petroleum has castigated Finance Ministry for not keeping its commitment of giving tax breaks to both oil and gas production saying the move will harm India’s brand as an investor friendly country. Though the Cabinet had guaranteed exemption from payment of income tax on oil and gas production from areas awarded under New Exploration Licensing Policy, the Finance Ministry is of the view the fiscal incentive are only meant for oil.

“The provision of a tax holiday is a key fiscal incentive to attract investors to explore in high risk areas in the Indian basins. Any decision on the withdrawal of such incentive would send conflicting signals to investors,” BP Group managing director and chief executive Iain Conn wrote to petroleum minister Murli Deora.

Bids for 57 blocks on offer in the seventh international auction round under NELP are due on June 30 and Petroleum Ministry fears ‘poor response’ in view of the tax controversy.Finance Ministry believes that the term mineral oil for the purpose of giving tax holidays includes production of only crude oil but it choose to ignore the fact that same tax incentives under the same act have been promised to producers of gas from below the coal seams (coal bed methane) where no oil can ever occur.

“It (withdrawal of tax breaks) also has the potential to harm India’s brand as an investor-friendly country if this was to be applied retrospectively to blocks which were entered into on the basis of a 7-year tax holiday being granted,” he wrote.

Finance minister P Chidambaram announced his version of the tax breaks in his Budget speech for 2008-09 and wants to apply it all areas awarded since 1999.

BP was awarded a CBM block in West Bengal in the third round of bidding for CBM blocks through a competitive bidding process.