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dna special: UPA's hydrocarbons policy may get quiet burial

Monday, 24 February 2014 - 8:30am IST | Place: New Delhi | Agency: dna

Work stuck as no consensus on revenue models, petroleum secy set to retire

The UPA government's hydrocarbons policy announced with fanfare last month is unlikely to see the light of the day as not much work has progressed on it due to approaching elections, non-consensus over revenue models and changes of key personnel.

On January 5, the Union petroleum minister, M Veerappa Moily, had said that the government had identified 56 oil & gas blocks to be auctioned under the tenth round of New Exploration Licensing Policy (Nelp) and the bidding would happen soon.

The policy promised a tax holiday for the companies and a simpler formula of revenue sharing with government.

According to petroleum ministry sources, the government is not in a position to finalise the timeline and the policy for the next round of bidding for oil and gas blocks and the country may see a complete overhaul of the policy after the new government comes in power.

The Gujarat government has already withdrawn approval for offering nine blocks in the Cambay basin of the state under Nelp X.

The central government, as per the Constitution, is the owner of both offshore and onland hydrocarbon resources. But the Narendra Modi government wants a share of revenues that the Centre will earn from the oil and gas produced.

This share of the Centre's revenue is additional to the royalty at the rate of 12.5% of price realised on the sale of crude oil and 10% for natural gas that currently flows to the state government.

In case the BJP-led NDA government comes into power, there could be a change in the hydrocarbon policy as Modi is the prime ministerial candidate for the NDA government.

Also, there is no consensus on the revenue sharing model that was proposed for the exploration companies. The government has two recommendations at its disposal, which include revenue sharing proposed by Rangarajan Committee and production sharing model proposed by Kelkar committee.

At present, oil companies can recover costs of exploration and production before sharing profit with the government.

The Comptroller and Auditor General of India had criticised this approach on grounds that it encouraged companies to increase capital expenditure and delay the government's share.

"There is a big question mark over the Nelp X round as series of developments in the past one month has led to uncertainty over the policy," Said former ONGC chairman, R S Sharma.

While there is a leadership change at the directorate general of hydrocarbons, the petroleum secretary is also retiring in the coming days, leading to a complete vacuum in the space of decision making, said Sharma.

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