Oil & Gas
Committee recommends extending tenure to entire economic life of the block: A Committee headed by Vijay Kelkar, set up by The Petroleum Ministry to suggest a road- map for improving the domestic production of oil and gas has recommended amongst other things that contracts under NELP be extended for the economic life of the blocks to build in incentives for operators to focus on long-term investments such as enhanced oil recovery techniques rather than short-term gains.
Committee recommends shift to Revenue Sharing Contract: A committee headed by Dr C. Rangarajan, Former Chairman, Economic Advisory Council has suggested making a shift from the current Production Sharing Contracts to the Revenue Sharing Contracts. The current regime allows the contractor to recover his cost, before giving the Government its share in the contractor’s revenues, in case there is commercial discovery leading to production. The Committee has proposed to dispense with the current model of cost recovery, in favour of sharing of the overall revenues of the contractor, without setting off any costs. This recommendation will ensure adequate revenue generation for the government, however, if implemented, is likely to face stiff resistance from the private sector.
Diesel deregularisation: The Union Oil Minister Mr. Dharmendra Pradhan has announced deregularisation of diesel in India. The Oil Ministry will be launching appropriate mechanism for deregularisation by bringing diesel at market rates and lifting price curbs accordingly.
Mineral royalty at highest: Royalty is a tax levied by state government on companies carrying out mining operations within the state. The royalty rates for mineral mining in India are the highest which brings a competitive disadvantage. The overall costs of India’s mining sector, including royalty and transportation costs amounts to approximately 30%.
Gas pricing policy: The government will announce a new gas pricing formula by the end of September, 2014 based on the report of a committee comprising of four Secretaries, set up to review the Gas Pricing Formula recommended by the Rangarajan Committee. The report of the review Committee is due on 10th September, 2014.
Supreme Court declares allocation of coal blocks between 1993-2010, illegal: The Supreme Court of India, through its decision dated 25th August, 2014 has declared all 218 coal block allocations made between the years 1993 to 2010 as illegal. Following the decision, the government has filed an affidavit expressing its concurrence on the cancellation of the coal block licenses, save for the 46 coal blocks; 40 of which are operational and the other six are nearing production and; nonetheless the government has left the final decision with the Supreme Court of India. Supreme Court’s decision on the matter which will decide the fate of 218 coal blocks allotted during that period has been reserved and no date for pronouncement of the judgment has been given by the Court.
The Government of India, vide its Notification No.S.O.2113 (E), dated 22 August 2014 has allowed 100% FDI through ‘Automatic’ route in the Rail Infrastructure sector. With this announcement India is poised to receive foreign investment in areas such as, high speed projects, dedicated freight lines, rolling stock including train sets, Mass Rapid Transportation Systems, besides other sub-sectors.
The Government of India, vide the Press Note No.7 (2014 Series) has further liberalised the FDI limit from 26% to 49%, in the defence sector. This is in line with the Government’s vision to give impetus to indigenous manufacturing and improved R&D in the defence sector.