India announces major policy initiative to boost hydrocarbon sector

In a significant development, the Indian government announced a big-bang policy initiative to help explorers to unlock hydrocarbon reserve worth $36.6 billion (Rs 2.33 lakh crore). This is more than 50 percent of the crude import bill estimated for 2015-16. The latest reforms, unveiled by the government in the oil & gas sector on March 10, will help retain and expand jobs amid low oil and gas prices as well as make it easier for them to do business.

The market-friendly decisions, taken by the Cabinet Committee on Economic Affairs, are expected to kick-start investment in the country’s exploration and production sector by easing intricate government. The latest reforms will cut red tape and remove government discretion, and seeks to create a fair marketplace with a transparent policy regime. Describing the new policies as global models, India’s Oil Minister Dharmendra Pradhan said: “I believe the world will follow us and investors will be back.”

The industry will benefit from the marketing and pricing freedom for gas from deep-water, ultra-deepwater and high pressure, high temperature blocks. The pricing formula for these fields is attractive despite a cap linked to alternative fuels – fuel oil, naphtha, imported coal and liquid gas. The formula will offer a price of $7 per unit, nearly double that of the going rate for gas from other fields. The cap will be revised every six months.

The new contracts will follow the revenue-share model instead of profit share model that has been criticised by the federal auditor.

Author Profile

India Writes Network: India Writes Network (www.indiawrites.org) is an emerging think tank and a media-publishing company focused on international affairs & the India Story. Centre for Global India Insights is the research arm of India Writes Network. To subscribe to India and the World, write to editor@indiawrites.org. A venture of TGII Media Private Limited, a leading media, publishing and consultancy company, IWN has carved a niche for balanced and exhaustive reporting and analysis of international affairs. Eminent personalities, politicians, diplomats, authors, strategy gurus and news-makers have contributed to India Writes Network, as also “India and the World,” a magazine focused on global affairs.