Kelkar panel submitted report to Union Oil Ministry

The Kelkar Committee submitted the first part of its report on 8 January 2014. The committee recommended continuing with the present production-sharing regime in contracts for blocks and allows companies to recover exploration and production costs.

A Committee was set up under Vijay Kelkar on 13 May 2013 to suggest ways of raising domestic oil and gas output. The panel was entrusted with the task of drafting a plan to reduce India’s dependence on overseas energy by 2030 and submit a report within six months.
Suggestions of committee:
•    It suggested administering Production-Sharing Contracts (PSC) without any changes and strengthening the Directorate-General of Hydrocarbons (DGH) for better administration.
•    Shifting to an open acreage regime, where companies can pick exploration areas through the year rather than wait for periodic auctions that offer areas identified by the government.
•    The panel has called for setting up a National Data Repository (NDR) that will preserve and promote the country’s natural resources data.
The second part of the report would cover pricing and taxation issues and is likely to be submitted in February 2014.
Under the present regime, oil companies can recover all costs of successful and unsuccessful wells from sales of oil and gas before sharing profit with the government.
The suggestions in the first part of the Kelkar Committee report are contrary to the royalty-sharing regime suggested by C. Rangarajan Committee, which has been accepted by the government. Under royalty -sharing regime companies are required to state upfront the quantum of oil or gas they would share with the government from the first day of production.
Rangarajan Committee had suggested for royalty sharing regime without cost recovery to check gold plating of investments by companies. Royalty sharing regime is prevalent in developed countries.
However, Kelkar Committee has opined that royalty sharing regime is not workable in Indian conditions wherein the exploration of oil & gas blocks are still under-developed. Thus, the Kelkar panel favoured the revenue sharing model for shallow and on-land blocks that are less cost-intensive than deep sea exploration.
The Comptroller and Auditor General (CAG) had criticised the PSC regime on grounds that it encouraged companies to increase capital expenditure and delay the government’s share.

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