Extracts - III: Gas Wars: Crony Capitalism and the Ambanis

On 7 January 2014, a committee appointed by (petroleum minister Veerappa) Moily in March 2013 to provide a ‘roadmap’ for increasing domestic oil and gas production, submitted the first part of its report to the minister. The Hindu on 8 January reported that the committee headed by Vijay Kelkar (a former petroleum secretary who had also played an important role in the design of the earlier PSCs) favoured retaining the production-sharing model for deep sea exploration. The panel held that guarantees for recovery of development costs would be important to attract international oil corporations with proprietary technology. It may be recalled that the CAG had criticised the PSC regime precisely on the ground that the contracts encouraged companies to increase capital expenditure and delay payment of the government’s share. The Kelkar committee, however, favoured the revenue-sharing model for shallow and on-land blocks that were less cost-intensive than deep-sea exploration. It also reportedly called for moving to an ‘open acreage’ regime whereby companies could pick exploration areas through the year rather than wait for periodic auctions for areas to be offered after these were identified by the government. To facilitate the new regime, the panel called for the setting up of a National Data Repository that would preserve and promote data on the country’s natural resources. The committee suggested that PSCs be administered without any changes and the DGH strengthened for better administration.

The Kelkar panel’s recommendations were clearly contrary to the royalty-sharing system suggested by the Rangarajan Committee which required companies to state upfront the quantum of oil or gas they would share with the government from the first day of production. Royalty sharing without cost-recovery would remove the possibilities for companies to increase capital expenditure and deny the government its share, as had been highlighted by the CAG. The government and RIL would continue to go by the terms and conditions laid down in the ongoing PSC, the Indian Express had reported on 23 December. Soon after the Cabinet clearance permitting RIL to sell gas from D1 and D3 at a higher price subject to the company furnishing a bank guarantee, the Indian Express quoted a government source saying that the existing contract with the contentious clause of the ‘investment multiple’ would continue. However, this would not be followed for other companies whose renewal would come up from the financial year 2015–16 onwards under the norms of the next, that is, the 10th round of auctions under the NELP. RIL was again being given a break.