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Oil and gas auction might be put on hold

Shine Jacob  |  New Delhi 

With the UPA II-regime getting into exit mode, the tenth round of oil and gas auctions are likely to be postponed till a new government comes to power.

It is not only the ministry of finance that has shied away from taking a call on whether a new revenue-sharing model should be adopted for oil and gas blocks. Even the Planning Commission has asked the petroleum ministry to put the process on hold.

Adding to this, the Narendra Modi-led Gujarat government had created a roadblock for the auctions - New Exploration Licensing Policy (NELP) - by withdrawing clearance for nine blocks in the Cambay basin, seeking a higher revenue share from the Centre. "The finance ministry is yet to give us a reply on what to do on the policy front. Moreover, the Planning Commission has asked us to put the process on hold till the time clarity comes on whether to go ahead with a revenue-sharing model or not," a senior petroleum ministry official told Business Standard.

In 2013, a panel, headed by Prime Minister's Economic Advisory Council chief C Rangarajan, had proposed a revenue-sharing model for NELP-X. However, contrary to this view, a committee, led by Vijay Kelkar, batted for continuation of the current model of production sharing contracts for deep water oil and gas exploration, taking into account of the lower potential in India. This model allowed the operator to recover the costs in advance before sharing profits with the government.

Moreover, Petroleum Minister M Veerappa Moily had even hinted at going for a mixture of both the models together.

"Since fiscal terms are not clear, NELP-X is unlikely to happen during this government's tenure. Moreover, the withdrawal of on-land blocks by Gujarat has also cast shadow on it. Moreover, data and blocks are not yet revealed on public domain," said R S Sharma, head of the Ficci Hydrocarbon Committee and former chairman of ONGC.

In January, the government had unveiled 46 blocks for offering in NELP-X, the first auction round in two years. This included 17 onland areas, 15 shallow water and 14 deep sea blocks. In terms of the number of blocks on offer, this round was supposed to be the highest, but with all the nine blocks from the Cambay basin out of race, only seven onland blocks are remaining with Mumbai and five blocks with Andaman basins too.

The decision of not extending the tax holiday on exploration of oil blocks being offered in the ninth round of bidding under the NELP had impacted that round too.

First Published: Wed, February 19 2014. 00:44 IST