Following the recommendations of the Rangarajan panel and that by the Comptroller and Auditor General (CAG), the Petroleum and Natural Gas Ministry on Wednesday said it is preparing a proposal to replace the present profit sharing mechanism under the production sharing contracts (PSCs) with a revenue sharing mechanism for the oil and gas industry in the country.

Speaking at the 12th Petro India conference here organised by the Observer Research Foundation (ORF), Joint Secretary (Petroleum) Aramane Giridhar said the government is introducing a simple mechanism to replace the present PSCs. “The new guidelines will come out in a few weeks. The PSC has to go. It is not good. The players in the sector should have freedom to take appropriate decisions without waiting for approvals from the regulator,’’ he added.

Mr. Giridhar said there no fair market in the natural gas because of the infrastructural deficit. “Some people say market should be allowed to fix the price, but what kind of market are we talking about,’’ he asked.

Petroleum Secretary Vivek Rae said while there is nothing wrong in the PSC system, one of the problems is in the lack of flexibility. “There is nothing wrong in the production sharing contracts, but we have to fix the rigidity and called for adopting international petroleum industry standards and practices in the country.

He said there was an urgent need to expand gas pipelines across the country, noting that while India has achieved only around 13,000 Km in India, China has already done over 55,000 Km. “There is no need for any more legislation as the sector is already over-legislated but still under-governed. There is also a need to expand CNG network as it is better not only in terms of environment friendliness but also from import advantages,’’ he said.

ORF Director Sanjay Joshi said while China has managed to tie up with diverse long term pipeline supplies from Central Asia, Myanmar and Russia, but India, despite being surrounded by some of the most gas prolific countries, is yet to build its first transnational gas pipeline.

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