The energy sector can brace for a big jump in expenditure as moves to liberalise gas prices are likely to prompt companies such as Reliance Industries, BP Plc and ONGC to develop idling deep-sea fields, while state refining and marketing firms spend heavily to supply cooking gas to rural homes that burn firewood. Finance minister Arun Jaitley announced that the government is considering allowing market prices for natural gas, which is currently fixed by a formula. Shares of Reliance, which wants free pricing of gas, rose 1.7% in a weak Mumbai market after the budgetary proposal but state-run Oil & Natural Gas Corp took a pounding, plunging almost 10% while Cairn India fell 5% due to other concerns. ONGC and Cairn India would gain from reduction in cess on oil production, although the market had anticipated a bigger cut. The cess has been cut from Rs 4,500 per tonne to 20% ad valorem. This will boost ONGC’s annual profit by Rs 1,400 crore at a crude oil price of $35 a barrel, its finance chief AK Srinivasan said. “The Street was expecting a much lower cess, which is why stocks are down,” said Ritesh Gupta, equity analyst at Ambit Capital. Jaitley cheered exploration companies, saying, “A proposal is under consideration for new discoveries and areas which are yet to commence production, first, to provide calibrated marketing freedom and second, to do so at a pre-determined ceiling price to be discovered on the principle of landed price of alternative fuels.” “Marketing freedom means producers will be free to choose buyers and prices. This should lead to more investments in the sector,” Srinivasan said, adding that more claritywasneeded onalternativefuelprices. However, linkage to alternative fuels was not easy, said Deepak Mahurkar, consultant at PwC. “The policy can get really complicated since alternative fuel prices are never static and consumers cannot practically switch between gas and other solid or liquid fuels everyday,” he said. The government also allocated Rs 2,000 crore to provide subsidised cooking gas to about 1.5 crore poor households in 2016-17. These connections will be offered to women in the family. The aim is to offer cooking gas to five crore poor families in three years, oil minister Dharmendra Pradhan said. Financial support of Rs 1,600 will be provided for each LPG connection. The government has proposed to invest Rs 87,000 crore in 2016-17 through the 11 state oil and gas companies. ONGC’s capex is marginally down to Rs 29,307 crore, while refining and marketing companies have budgeted higher capital spending, led by Indian Oil Corp, with Rs 13,772 crore. “The substantial increase in downstream companies’ capex is in line with the global trend and will positively help the sector and national exchequer,” said Gaurav Moda, a consultant at KPMG. Excise duty on aviation turbine fuel has been increased from 8% to 14%, except at regional airports.