Govt okays relaxing production sharing contracts of Pre-Nelp, NELP blocks

Sops will give relief to companies like ONGC and Oil India on sharing of royalty and cess in pre-Nelp exploration blocks

The Union Cabinet on Wednesday eased the policies related to hydrocarbon exploration further by relaxing production sharing contracts (PSC) of Pre-New Exploration Licensing Policy (Nelp) and Nelp blocks. 

This includes giving relief to companies like ONGC and Oil India (OIL) on sharing royalty and cess in pre-Nelp exploration blocks. From payment of 100 per cent royalty, these companies will now have to pay an amount depending on their equity in the project and the same has been made cost recoverable with a prospective effect. 

This will be applicable to 28 exploration blocks awarded to private companies between 1980 and prior to implementation of NELP, where ONGC and OIL have the rights for participation in the blocks after hydrocarbon discoveries. 

“We had been continuously improving the PSC model to help in the ease of doing business. Wednesday’s decisions will help boost production in the pre-Nelp regime and also North East region,” said petroleum minister Dharmendra Pradhan, while addressing the media. 

To ramp up the production of hydrocarbon in the North East region, the government has increased the exploration period by two years and appraisal period by one year. Moreover, to stimulate natural gas production in NER, the government has also allowed marketing, including pricing freedom for natural gas to be produced from discoveries which are yet to commence production as on July 1 this year. This move is likely to help OIL the most. 

The Cabinet also extended tax benefits under Section 42 of the Income Tax Act, 1961 prospectively to operational blocks under Pre-Nelp discovered fields for the extended period of the contract under PSC extension policy dated March 28, 2016. Section 42 of the Income Tax allows companies to claim 100 per cent of expenditure incurred under PSC as tax deductible for computing taxable income in the same year. 

The Union cabinet has also given its approval to grant special remission to prisoners as part of the 150th birth anniversary of Mahatma Gandhi. The prisoners will be considered for special remission and released in three phases — October 2, 2018 (birth anniversary of Mahatma Gandhi), April 10, 2019 (anniversary of the Champaran Satyagrah) and October 2, 2019 (birth anniversary of Mahatma Gandhi). Those who are eligible for relief will include  women convicts and transgenders of 55 years of age and above, who have completed  50 per cent of their actual sentence period, male convicts of 60 years who also completed half their term. 

 The government also approved the proposal for continuation of various scholarship schemes for students belonging to the six notified minority communities at a cost of Rs 53.38 billion for period up to 2019-20. This will benefit 7 milion students annually.