The government on Wednesday announced constitution of a committee under C Rangarajan, chairman, PM’s Economic Advisory Council, to review the existing production sharing contracts signed between the oil and gas companies and the government for developing exploration blocks.
“The committee will review the existing PSCs, including in respect of the current profit-sharing mechanism... and recommend necessary modification for the future PSCs,” said an official statement.
Officials said the committee has been constituted after intervention of the Prime Minister’s Office (PMO), following increasing disputes between the developers of the oil and gas blocks and the government. The Committee has been asked to submit its report by August 31.
The trigger for this review is clearly seen as the ongoing spat between Mukesh Ambani-led Reliance Industries Ltd (RIL) and the oil ministry over declining gas production and the cost recovery from the block.
RIL has already dragged the government into arbitration for disallowing a recovery of $1 billion (R5,500 crore) from the producing KG-D6 gas field. Besides, RIL has also sought an increase in the price of gas that is being produced from the KG-D6 field from the existing government fixed price of $4.2 a unit.
The petroleum ministry has recently issued a R5,500 crore penalty notice to the company earlier this month for not fulfilling obligations and failing repeatedly to meet targets, factors, which it said caused considerable losses to the government.
Besides, the Committee shall also be exploring various contract models with a view to minimise expenditure monitoring of the contractor without compromising, firstly, on the hydrocarbons output across time and secondly, on the government’s take.
The Committe would be “a suitable mechanism for managing the contract implementation of PSCs,” the statement said.
“Suitable governmental mechanisms to monitor and to audit Government of India (GOI) share of profit petroleum,” have been listed as another term for the Committee.