No, oil’s not well at all

The Economic Survey 2019-20 points out the fact that India’s dependence on oil imports increased to 85% in April-December 2019, against 78.3% in 2014-15. Domestic oil production is estimated at 32.6 million tonnes in the current year, against 34.2 million tonnes in 2018-19, making it the lowest in the last eight years. Oil production has reached a plateau, while gas production is showing a rising trend.

In the 1990s, GoI entered into production-sharing contracts (PSCs) with private sector players and handed over discovered small and medium fields to them, as they were too small for Oil and Natural Gas Corporation (ONGC) to deal with. Under the PSC arrangement, operators allotted these fields would invest their resources into drilling and development activities.

GoI would buy the complete production at prices benchmarked to rates in the international markets. It took a share of the operating revenues in the forms of royalty, cess and profit petroleum, besides value-added tax (VAT) and income-tax (I-T) on the profits of the enterprise. Typically, the amounts payable as royalty and cess were fixed in rupee terms (per tonne), except gas, which was generally at 10% of the wellhead price, ad valorem.

The PSCs were valid for 25 years, and could be extended for another 5-10 years. Many private players entered the fray, but only a few were successful because of the plethora of problems —from regulatory to operational and infrastructural

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