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.

Coal

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.

Railways

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.

Defence

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.