NEW DELHI: The Petroleum Ministry has been asked to do some soul-searching. It has been told to prepare a white paper to improve the investment climate under the oil and gas auction rounds.
The fading interest of big players and constant rescue acts by ONGC and other public sector oil companies in successive New Exploration Licensing Policy (NELP) rounds seem to be the trigger for this move.
There are indications that production-sharing contracts, including the profit-sharing mechanism for the oil and gas block auctions, may see changes in the tenth round.
In the ninth round of NELP, it was public sector oil companies ONGC, OilIndiaand GAIL that saved the day, with seven out of 16 blocks taken by them.
A person familiar with the development told Business Line that: “The Cabinet Committee on Economic Affairs, while awarding exploration blocks under NELP-IX, felt that the investment climate needed to be improved. That is why it directed the Petroleum Ministry to bring out a suitable paper for its consideration at an early date.”
At the signing of the production-sharing contract for NELP IX, the Petroleum Minister, Mr S. Jaipal Reddy, had said that the Government was having a close look at the NELP provisions to make them more transparent, automatic and less intrusive.
In the ninth round, some blocks had got stuck in inter-ministerial squabbling. In future rounds, the Petroleum Ministry proposes to resolve this issue.
An official said that issues behind the waning interest from domestic private and foreign investors can be grouped into two categories. One is related to approvals. “With so many Central and State agencies involved, investors feel very frustrated about getting things done in time,” he pointed out.
The second issue is related to taxation. The Finance Ministry, in the Budget last year, struck down the seven-year tax holiday. Accordingly, bidders in the ninth round of NELP were not offered this incentive.