The Finance Ministry has asked the Petroleum and Natural Gas Ministry to formulate a proposal for inter-Ministerial consultations on the revenue sharing arrangement suggested by the Rangarajan Committee for the oil and gas sector.
It may be recalled that Finance Minister P. Chidambaram had, in his 2013 Budget Speech, stated that oil and gas exploration contracts would be awarded on a revenue-sharing basis, shifting from the current profit-sharing one.
The Comptroller and Auditor General (CAG), in its report in 2012, had strongly pitched for shifting to a revenue-sharing formula, stating that the current production-sharing contracts (PSCs) provided for explorers to first recover all of their capital and operating expenditure before sharing profits with the government under a specific formula. However, gas producers have strongly opposed to the new formula. But the Finance Ministry is keen that the new formula should be adopted for the oil and gas blocks offering under New Exploration Licensing Policy (NELP) Round X, expected early next year.
The CAG had, in its report, criticised the Petroleum Ministry and the Directorate-General of Hydrocarbons for having failed to protect the government’s financial interests, and had called for structural changes in the present PSCs for the management of hydrocarbon exploration and production, involving the private sector.
“The Petroleum Ministry is actively looking into the Rangarajan Committee recommendations on this issue, and is expecting to complete the exercise shortly,’’ a senior Petroleum Ministry official stated.
Under the revenue-sharing model, there is no element of cost-recovery, and the government and the operator will share revenues according to a pre-determined formula.