Author
<p>Neeraj Thakur Biography</p>
When the Supreme Court decided to cancel 204 coal blocks, allocated since 1993, the underlying judgment was that in the absence of a competitive bidding mechanism for allocation of natural resources, the decisions to allocate coal blocks to private sector by the successive government were arbitrary. It, however, appears that the latest round of auctions were not so different after all. There is a fresh controversy surrounding the recent cancellation of four coal blocks, won by Jindal Steel and Power (JSPL) and Balco in the auctions held in February, on similar grounds.
Read More
A day after Prime Minster Narendra Modi ridiculed the mega welfare scheme of the previous UPA government known as the Mahatma Gandhi Rural Employment Guarantee Act (MNREGA) by calling it an ‘epitome of failure’, finance Minister Arun Jaitley in his budget day speech said that depending on tax buoyancy his government will give additional Rs 5,000 crore to the scheme which would be over and above the budgetary allocation of Rs 34,699 crore. Jaitley also acknowledged the job providing nature of the scheme, saying “Our government is committed to supporting employment through MGNREGA. We will ensure that no one who is poor is left without employment. We will focus on improving the quality and effectiveness of activities under MGNREGA.” The question arises as to why the prime minister and the finance minister of the country gave opposite views on the scheme within 24 hours. The answer lies in Prime Minister Narendra Modi’s speech a day before the budget when he said that people might question his economic understanding but there should be no doubt over his political understanding. After calling the MNREGA an epitome of failure for the UPA, he said that he would not shut down the scheme ever. An analysis of some critical numbers in the past few months indicates that the NDA government’s crackdown on the scheme by way of reducing fund allocation to states had backfired. Rural wages in India registered an average annual growth of 3.8 per cent in November 2014, the lowest since July 2005, according to Labour Bureau data. The 3.8 per cent year-on-year increase was a significant drop relative to the two-digit growth rates prevailing until June, and the peak 20 per cent-plus levels of 2011. The result of this was visible on the growth projection of FMCG companies like HUL that reported a volume growth of 3 per cent against analysts' expectation of around 6 per cent, which sent its shares lower by more than 5 per cent on the stock exchanges after December quarter result. A similar trend was visible in the same period in the sale of motorcycles in India. Domestic motorcycle sales contracted 6 per cent to 868,507 units in January 2015. This was the fourth monthly fall from the previous year. One should note that the NDA government came to power in May 2015 after which its first target was the MNREGA scheme. A set of economists, including Jayati Ghosh, a professor of economics at the Jawahar Lal Nehru University, had even written a letter to the Prime minister telling him about the decline in rural wages due to the lowering of funding for MNREGA from the central government. The current government has at its helm, free market economists like Bibek Debroy and Arvind Panagariya who have been accusing the UPA government for creating an economy of subsidies that hampered growth. On their advice, the government gave feelers to the state government that it will not release funds under MNREGA. Nitin Gadkari, former rural development minister, had proposed to restrict the rural job guarantee scheme to 200 most backward districts, and dilute the wage-material ratio in favour of the latter. The confusion of the government on the benefits/harms of the scheme is only affecting the rural workers, as the scheme is prone to corruption and in a negative environment like the one prevailing for the last 9 months has aggravated the problems. The government which came with the mandate of creating jobs for the poor, should understand that while MNREGA is not the permanent solution for job creation, yet, it is an interim measure to provide the stimulus to the Indian economy suffering from lack of demand. The prime minister should not have any doubt over this.
Read More
Prime Minister Narendra Modi’s brainchild, the NITI Aayog, or the National Institution for Transforming India, faces intense scru- tiny from backers and critics alike. Change is never easy, especially when it involves a 64-year-old institution. Everything, from its set- ting up, its objectives and the stated aim to be as different as possible from the Planning Commission, its predecessor, is up for question. Sole Purpose The new body has been envisaged by the National Democratic Alli- ance (NDA) government as one that will be more inclusive in its ap- proach even as it acts with greater transparency in the spirit of feder- alism. What will set up apart from the Planning Commission, the government hopes, is its role of being a thinktank for development- oriented policy-making for the states and the Centre. In the past, many state chief ministers have accused the Planning Commission of adopting an authoritarian approach while dealing with the state problems. On 1 Janurary 2015, Modi tweeted: “Through the NITI Aayog, we bid farewell to a one-size-fits-all ap- proach towards development. The body celebrates India’s diversity and plurality.” As a chief minister of Gujarat, Narendra Modi had always criticised the Planning Commission for playing the bully, while allocating funds. To start with, the NITI Aayog has done away with the position of a secretary; instead, it will be run by a chief executive officer (CEO). Coincidentally, the job goes to the Planning Commission’s last member secretary Sindhushree Khullar. The body will have two full-time mem- bers — economist Bibek Debroy and former Defence Research and Development Organisation (DRDO) chief V.K. Saraswat — apart from four ex officio members (Union ministers) and three special invitees. While the body will be chaired by Modi, the appoint- ment of Arvind Panagariya, a free market economist, as its vice-chairman has invited a fair bit of criticism from those fearing the death of the welfare state. Manish Tewari, the former Union minister for infor- mation and broadcasting in the United Progressive Alli- ance (UPA) government, says: “India is still a country that requires state intervention. The government can- not just be a facilitator of and for corporates while making polices.” He also criticises the government’s decision to transfer all fiscal powers to North Block (the finance ministry), adding that the constitution of the country does not allow for this kind of centralisation of powers. His criticism stems from the fact that the budget- making exercise has totally shifted to the finance minis- try this year. While the Planning Commission normally plays a role by way of recommending allocations for var- ious ministries, the government’s failure to re-constitute it in time brought on the shift. Ajay Chibber, former director general of the Inde- pendent Evaluation Office, associated with the Planning Commission, sounds a note of caution. He believes the NITI Aayog “is not too different from the Planning Commission — with permanent members, designated ministers and many of the old bureaucrats who have been retained — which is somewhat worrisome”. High Hopes But there are many who believe that the new institution will make a difference. Sudha Pillai, who served as a member secretary of the Planning Commission, is optimistic. “The idea of a governing council comprising the chief ministers of all states will help in resolving many issues between the Centre and states.” She hastens to add that the new body should have a say in budget-mak- ing. “There should be some sort of consultation between the body and the finance ministry, while formulating the budget.” Amid the criticism and appreciation for the NITI Aayog, one thing stands out that Modi has killed a Nehruvian legacy; will he be successful in creating one of his own? Only time will tell. (This story was published in BW | Businessworld Issue Dated 09-02-2015)
Read More
Over the past year, India’s power sector has witnessed an unusual trend: a slew of deals to acquire distressed assets has fallen through at the last minute.
Read More
Is auctioning of energy resources the best way to increase production? India’s hydrocarbon sector would prove to the contrary. After 15 years and nine rounds of auctions under the New Exploration and Licensing Policy (NELP), the country awarded 260 hydrocarbon blocks to the private sector, but only three of them have started commercial production. This is why India imports 75 per cent of its fuel, which accounted for one third of its import bill of $168 billion (Rs 102,480 lakh crore) in 2013-14. Out of the three blocks, one is under arbitration: the contractor has been accused of misrepresenting the investment figures and the government has levied a penalty of over $2 billion on him for not producing the projected quantity of gas. The NDA government has decided to overhaul the hydrocarbon policy, although the recommendations for doing so were prepared by a committee appointed by its predecessor, the UPA government. The government has prepared a draft Model Revenue Sharing Contract (MRSC), which seeks to plug loopholes in the existing policy and create a more conducive and competitive environment for attracting foreign firms to invest in India’s hydrocarbon basins. The Fine PrintFor one it is a comprehensive policy for the entire hydrocarbon sector. Earlier, NELP was only for the oil and gas sector while hydrocarbon resources such as coal bed methane (CBM) and shale gas were governed by separate policies. But a merger of all policies into one has been demanded by the industry for years. The new policy proposes a model that would not allow cost recovery of investments to the company. Rather, the company has to indicate how much oil and gas it would share with the government at different stages of production as well as at different rates. Also, the government’s revenue share would be determined by the production price matrix. “The government’s revenue share of crude and/or natural gas shall be determined based on a two-dimensional production-price matrix, where the government’s revenue share with the contractor(s) shall be linked to the average daily production in a month and the average oil and gas prices during the same time,” reads the draft MRSC. Besides quoting the quantity the companies would share with the government at different levels of production, the former would be required to quote the quantum at different price levels — for example, at less than $100 per barrel, $100-125, $125-150 and over $150 per barrel for crude. For gas, the draft policy proposes four price bands: starting at under $6 per million British thermal unit (mmbtu), it goes up to over $14 per mmbtu, with $6-10 and $10-14 in between. The production levels for onland, shallow offshore and deepwater have been proposed in different tranches. Under the cost recovery model, companies would bid for maximum work programme (the amount of capital to be invested) and the government would get its revenue only after the company recovered its investments. This model was criticised by the comptroller and auditor general as it encouraged companies to keep raising the cost so as to postpone higher share of profits to the government. Pros And ConsAnalysts say that in developed countries the cost recovery method works due to the trust between the government and companies. In India, there is always suspicion over the investment figures drawn up by a company. This is why the revenue sharing model is better. “It is about the cultural difference,” says an analyst with an international consultancy firm. “In India, the private sector hasn’t won the government’s trust. So, the cost recovery method created problems.” That there is lack of trust between the government and the investors is substantiated by the introduction of the escrow account in the MRSC. According to the guidelines in the draft, the contractor has to deposit in an escrow account the entire revenue from the sale of oil and gas. Any withdrawal from the account would be decided by the government. P. Elango, former chief executive officer of Cairn India, questions the logic of the escrow account. “It is for short-term transactions,” he says. “In the oil and gas sector, contract terms extend to over 25 years. Investors would be disappointed if they do not have direct access to revenue.” He believes that by making the escrow account mandatory, the government has killed the spirit of trust that is necessary between two parties to work for a long time. R.S. Sharma, former chairman of Oil and Natural Gas Corporation, also criticises the escrow account clause and wants the government to withdraw it. The draft policy differentiates between the levels of challenges that the geography of a block poses for an explorer. Hence, the government has proposed different timelines for the submission of the appraisal programme based on different categories such as ultra deep water, high temperature, tight reservoirs, etc. For onland and shallow water blocks the timeline has been increased from 34 months and 10 days to 60 months and seven days; for deep water blocks, it works out to 66 months and seven days, from the earlier 46 months and 10 days. The government has tried to make companies accountable for their production projections. If an operator does not produce the oil or gas promised under the annual programme quantity, he will be penalised as per a clause in the MRSC. For example, Reliance Industries, the operator of KGD6 basin, had projected that it would produce 80 million metric standard cubic metres of gas per day (mmscmd), 2012 onwards. But it has been producing only 8-15 mmscmd of gas for the past two years. “If a contractor falls short by over 25 per cent of his projection in any year, liquidated damages of 10 per cent of the value of the shortfall will be imposed on him,” reads the proposed policy. While preparing the draft MRSC, the government has tried to walk a tightrope: plug the loopholes that were exploited by the contractor in the KGD6 basin, but allow flexibility in the timelines for bringing discoveries into production. Comparing the existing production sharing contract (PSC) with the draft MRSC, former secretary to the government of India E.A.S. Sarma says: “PSCs incentivise gold-plating of investments and over-invoicing of costs permitting money laundering. The MRSC averts these possibilities, but ends up leaving scope for understating potential production schedules to escape penalties and under-invoicing revenue accruals to profit at the government’s expense.” The final policy will incorporate some changes taking into account the suggestions of the stakeholders. Whether the overhaul will help India ramp up its hydrocarbon production will be known in the next four to five years. (This story was published in BW | Businessworld Issue Dated 15-12-2014)
Read More
The proposed sale of power assets of Jaiprakash Power Ventures (JPV) has been making news for over a year now.The latest development is that the company has entered into a binding agreement with Sajjan Jindal-owned JSW Energy to sell its power plants, which have a combined generation capacity of 1,891 megawatts (mw). The bouquet includes the 300 mw Baspa-II Plant, the 1,091 mw Karcham Wangtoo (KW) Hydro-electric Plant and the 500 mw Bina Thermal Power Plant. Before the MoU for this deal was signed, two other companies had shown interest in JPV’s hydro assets.One of them, PJSC or Taqa — a consortium led by Abu Dhabi National Energy Co. — withdrew from the agreement to purchase two of JPV’s hydro plants for Rs 9,689 crore on 24 July 2014. The other was Anil Ambani-owned R-power, which entered into a non-binding MoU with JPV to buy its three operational hydro power plants for Rs 12,000 crore. The deal fell through in just two months.Irrespective of whether JPV proves lucky this time with JSW Energy, the failed deals will definitely raise some tough questions. The first being whether there was something that sent away the previous prospective buyers. And if there was something, was it a problem specific to the project or symptomatic of the larger issues plaguing India’s energy projects.While Taqa said its decision to pull out was triggered by a change in the business strategy and priorities of the group, R-power never gave any official reason for its decision to backtrack.All that is known is last month the Central Electricity Authority issued a show-cause notice to JPV for violation of Techno Economic Clearance (TEC) conditions granted to KW project, casting a shadow over the future of the plant. The KW project, marred by tariff issues, was part of the bouquet of plants that JVP was selling in all the three MoUs it signed.While the valuation of the power assets looks good, lack of clarity on the future revenue stream of the KW project could make it difficult for the prospective buyer to arrange finances for the deal.JPV did not reply to BW’s queries seeking clarity on the proposed deal.Valuation of power plants in India has always been tricky. There are underlying regulatory, financial and fuel issues that have to be taken note of. And JPV is no different. neeraj@businessworld.in@neerajthakur2
Read More
Companies that win the captive coal mines in the auction route would be allowed to swap the coal with other companies and even divert their coal to their other power plants under the new guidelines issued by the Ministry of Coal ahead of the auction.The Coal Ministry on Tuesday (18 November) released draft guidelines for allocation of 74 coal blocks.The clause has been included to avoid the controversy that surrounded the coal mines, named Kerandari B&C in Jharkhand. The government had allowed the R-power, the allottee company for running the Sasan UMPP to divert its coal to another group plant. The decision was challenged by Tata Power in the HC and was also questioned by the Comptroller & Auditor general of India which said that allowing diversion of coal to another power plant after awarding the mine will lead to a windfall gain ot the company.Under the new bidding rules, the government has given flexibility to the companies to divert their coal to other power plants with prior notice to the government,” said Anil Swarup, Coal Secretary.The government is yet come up with the floor price of mines that are to be auctioned and aan expert group is working on the subject. The government is also planning to have a cap on the maximum number of mines that a company can bid for in the auctions.The due date for coal auction is February 11. The Ministry plans to complete technical process of allotment by March 3, 2015, and issue letter of award by March 16. In September 2014, the Supreme Court had cancelled 214 coal blocks allocated since 1993, saying the blocks had been given out in an ad-hoc and casual manner. After the order, the NDA government moved an ordinance that allows auction of these blocks. In the first phase the government plans to auction only 34 blocks.neeraj@businessworld,inneeraj.epiphany@gmail.com@neerajthakur2
Read More
The NDA government is working on a formula to limit the number of people getting subsidised LPG cylinder on the basis of their income. The formula is being worked out and will be unveiled during the Budget of 2015, allowing the government to bring down its fuel subsidy bill substantially.“Why should upper middle class people be entitled to subsidy in the LPG cylinder? The NDA government wants only the poor and the middle class people get the subsidy on LPG cylinder,” said a person privy to the issue.Earlier, the ministry of petroleum had urged the senior executives of the oil marketing companies to surrender subsidised LPG connections voluntarily. The government has also urged people in the high income bracket and users of piped natural gas, to give up their subsidised cylinders. However, as per the newspaper reports, a little over 8,000 people have registered for surrendering their subsidised LPG connections. There are 15 crore LPG connections in the country and the government- including the previous UPA government- has been trying to dissuade people from consuming subsidized cylinders.The government is likely to decide a threshold for LPG subsidy based on the income tax return filed by people. However, it does not want to omit people at the lower end of the tax pyramid.From November 14, the government also re-started the direct subsidy transfer to the accounts of consumers of LPG cylinders in select districts. From January 1 this year, only those people will get the subsidy in their accounts who will have attached their bank accounts with Aadhar number.Union minister for petroleum had earlier said that his ministry was consulting the department of expenditure on a new system of fixing the subsidy with Department of Expenditure. Currently, consumers pay less than half the market price for up to 12 subsidised cylinders.In 2013-14, the government and its oil marketing companies s bore a revenue loss of Rs 46,400 crore on account of selling LPG below market price.In Delhi, the cost of a non-subsidised cylinders is Rs 880 each, as against Rs 414 for a subsidised cylinder.In its attempt to control the fuel subsidy, the NDA government in October de-controlled the diesel prices in the country. The fall in the international crude oil prices and the de-control of diesel will lead to reduction of fuel subsidy at Rs. 75,000 crore in FY15 as against Rs 1,40,000 in the previous year. neeraj@businessworld.inneeraj.epiphany@gmail.com@neerajthakur2
Read More
Gurgaon — a part of the National Capital Region — is fast catching up with its bigger neighbour, Delhi. It is now among the top three competitive cities in India, behind only the national and the financial capitals of the country. Its ranking rose three places in 2014, with an overall score of 64.10 as against Mumbai and Delhi, which scored 70.06 and 73.13, respectively.According to the India City Competitiveness Index 2014 — published by the Institute for Competitiveness — Gurgaon fared well on indicators such as communication environment and business incentives.That is quite a surprise as, until a few years ago, Gurgaon was far from being a popular destination for doing business. Every summer, the city faced frequent and long power cuts. It, in fact, mostly survived on private power back-up. The situation improved only after some local industrialists met with the government in October 2013 to find a solution. The government, which promised to improve the situation by January 2015, installed 16 new substations. It spent Rs 581.82 crore to bring the city out of ‘darkness’. Now, Gurgaon boasts of a renewable energy park, which cost around Rs 2 crore to build. Result: The city scored a total of 93.54 points in business incentive. But power was not the only problem the city was beset with. Despite being the city with the best of the IT industry, Gurgaon was often criticised for its poor infrastructure — seen as a restricting factor to growth. People living or working in the city had no option but to travel in poorly maintained private buses or highly unsafe ‘shuttle’ autos. Things didn’t change much even after the Metro reached Gurgaon as many, not living in the vicinity of Metro stations, continued to have a tough time making the best of this modern transport system. The government’s long-term planning has, however, started bearing fruit. The monorail, launched in November 2013, now connects different commercial hubs in the city and provides the last-mile connectivity with the Metro.The situation is likely to improve further as the municipality, in its 2014 budget, has allocated Rs 500 crore solely for infrastructure projects like underpasses, flyovers, roads and bridges out of the total budget of Rs 889 crore. The government has also started a low-floor bus service in the city, which will provide relief to Gurgaon’s burgeoning population. All Sparkle: Gurgaon scored a total of 93.54 points in business incentive and has largely overcome its power problem (Photograph by Sanjay Sakaria)“The infrastructure in Gurgaon has improved drastically over the past few years, and today, I find it much more convenient to travel in Gurgaon than in Delhi’s Greater Kailash,” says Rattan Kapur, chairman, Haryana state council, CII.One area where the city’s ranking has slipped is ‘institutional support and supplier sophistication’. It ranked 17th in 2014, compared to its 11th spot in 2013.The city still suffers during the monsoon as large swathes of its residential as well as commercial areas face water-logging which, in turn, lead to massive traffic snarls. Gurgaon can, however, improve its performance on parameters related to finances, communication, administrative capacity and innovation, where it ranks 11th, much below Chennai, which ranks third in these particular areas. In ‘income distribution’ and ‘demographics’, Gurgaon scored 67.24 and 58.52, taking the seventh position in the index.Although Gurgaon has seen a marked improvement in its ranking, to rise further, it will have to deal with the challenges of increasing crime, a skewed sex ratio and the high cost of living. Kapur believes that with resident welfare associations and the police working together to control crime, Guragon will do well in the future on these parameters too. (This story was published in BW | Businessworld Issue Dated 01-12-2014) ]]>
Read More
Is auctioning of energy resources the best way to increase production? The experience of India’s hydrocarbon sector would certainly prove to the contrary. After 15 years and 9 rounds of auctions under the New Exploration and Licensing Policy (NELP), the country has managed to award 260 hydrocarbon blocks to the private sector. However, only three of the discoveries have actually started commercial production.This is the reason why India imports 75 per cent of its fuel requirements accounting for one third of India’s import bill at $168 billion (Rs 102,480 lakh crore) in 2013-14. Out of the three blocks under production, one is under arbitration where the contractor is accused of misrepresenting the investment figures with the government levying a penalty of over $2 billion on the contractor for not producing the projected quantity of gas.The newly elected NDA government, like in other sectors, has decided to overhaul the hydrocarbon policy in the country, even though the recommendations were prepared by a committee appointed during the Congress-led UPA government.The government has prepared a draft Model Revenue Sharing Contract (MRSC), which seeks to fill up the loopholes of the previous hydrocarbon policy and create a more conducive and competitive environment to attract foreign companies to invest money in India’s hydrocarbon basins.The Fine PrintThe government has prepared an uniform policy for the hydrocarbon sector this time. The NELP policy was only for the Oil and gas. Other hydrocarbon resources like CBM and shale gas were governed by separate policies. Merger of all policies into one was being demanded by the industry for many years.The new policy proposes a model that does not allow cost recovery of investments. Rather the company will have to indicate the quantity of oil and gas it will share with the government at different stages of production as well as at different rates. Under the newly proposed model, the government’s share of revenue will be determined through production price matrix."The government's revenue share of crude oil and/or natural gas shall be determined on the basis of a two dimensional production-price matrix, where the government's revenue sharing with the contractor(s) shall be linked to the average daily production in a month and average oil and gas prices in a month," reads the draft MRSC.Besides quoting the amount the companies will share with the government at different levels of production, the companies would also be required to quote the quantum at different price levels. For example, at less than $100 per barrel, at $100-125, $125-150 and at more than $150 per barrel for crude oil. In case of gas, the draft MSRC proposed 4 price bands starting from less than $6 per million British thermal unit rate (mmbtu), $6-10, $10-14 and more than $14 per mmBtu.The production levels for onland, shallow offshore and deepwater have been proposed at different tranches.Companies will have to bid the amount they will share with the government at different levels of production as well as different rates for oil and gas.Under the cost recovery model, the companies used to bid for maximum work programme, (the amount of capital to be invested). In that model, the government would get its revenue only after the company recovered its investments. This model was criticised by the Comptroller & Auditor General which said it encouraged companies to keep raising cost so as to postpone higher share of profits to the government.Is Revenue Sharing Better Than Cost Recovery?Analysts feel that the in the developed countries, it is the cost recovery method that is successful because of the trust between the government and the companies. However in India, there is always a suspicion over the investment figures produced by a company. This is why, the revenue sharing model is better. “It is about the cultural difference. In India, the private sector has not won the trust of the government. Therefore cost recovery method created a lot of problem,” said an analyst with an international consultancy.The fact that there is lack of trust between the government and the investors is substantiated by the introduction of the escrow account in the draft MRSC.According to the guidelines issued in the draft MRSC, the contractor will be required to put all the revenue generated through the sale of Oil and gas in an escrow account. And any withdrawal from the account will have to be decided by the Government.P Elango, former CEO of Cairn India Ltd, questions the logic of escrow account in the proposed policy. “It is for short term transactions. In the Oil and gas sector, contract terms are for over 25 years. Investors would be very disappointed if they do not have direct access to revenue.” said Elango.“By making escrow account mandatory, the government has killed the spirit of trust that should be there between the two parties to work together for such a long duration,” added Elango.RS Sharma, Former Chairman, ONGC also criticised the clause on Escrow account and said the government should withdraw this part of the draft immediately.The draft policy differentiates between the levels of challenges that geography of the block poses for the explorer. Based on this, the government has proposed different timelines for the submission of appraisal programme based on different categories like Ultra deep water, high temperature and tight reservoirs etc.For onland and shallow water blocks, the time has been increased from 34 months 10 days to 60 months 7 days. Similarly, for deep water blocks, the appraisal timelines has been increased from 46 months 10 days to 66 months and 7 days.The government has also tried to make companies accountable for the production projections that they make. It has introduced penalties through a clause in case an operator does not produce the Oil or gas promised under the annual programme quantity.Reliance Industries, operator of the KGD6 basin, had projected that it will produce 80 million metric standard cubic meters of gas per day from 2012. However, the company missed its target by miles and has been producing between 8-15 mmscmd of gas for the past 2 years.“In case, the contractor fails to achieve the approved programme quantity in any year and falls short by more than 25 per cent of the Programme quantity, liquidated damages of 10 per cent of the value of the shortfall will be imposed on the Contractor,” reads the proposed policy.The government while preparing this draft MRSC, has tried to walk a tight rope. On one hand it has tried to repair the loopholes that were exploited by the contractor in the KGD6 basin, on the other it has tried to be flexible with the timelines for bringing discoveries into production.Former secretary to the government of India, EAS Sarma compared the existing production sharing contract with the proposed RSC: “If the existing production sharing contracts (PSCs) incentivise gold-plating of investments and over-invoicing the costs, that permits money laundering, the proposed revenue sharing contracts (RSCs) avoid these possibilities but, on the other hand, provide scope for under-stating potential production schedules to escape penalties and under-invoicing revenue accruals to profiteer at the expense of the government.”The final policy will have some changes as per the suggestions of the stakeholders, but whether it helps India ramp up its hydrocarbon production will be known only in the course of next 4-5 years.neeraj@businessworld.inneeraj.epiphany@gmail.com
Read More
