The government is coming out with a new mechanism to replace the contested Production Sharing Contracts (PSCs) in the oil and gas sector.
This was revealed here today by Aramane Giridhar, Joint Secretary (Exploration) in the Ministry of Petroleum and Natural Gas while addressing the 12th Petro India conference organised by Observer Research Foundation along with India Energy Forum.
He said the government is introducing a "simple mechanism" to replace the PSCs. "The new guidelines will come out in a few weeks", he told the conference "India's Regulatory Dilemma: Too much or Too Little" while making a presentation on "Upstream: Exploration and Production regulations".
"The PSC has to go. It is not good", he said, arguing that the players in the field should have freedom to take appropriate decisions without waiting for approvals from regulator.
He argued that there is no fair market in the natural gas because of the infrastructural deficit. "Some people say market should be allowed to fix the price, but what kind of market are we talking about?," Giridhar asked.
Earlier, delivering the keynote address, Petroleum and Natural Gas Secretary Vivek Rae said while there is nothing wrong in the PSC system, one of the problem is in the "lack of flexibility".
"There is nothing wrong in the production sharing contracts, but we have to fix the rigidity," he said.
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He called for adopting international petro industry standards and practices in the country.
Describing the PNGRB Act as a futuristic legislation, Mr Rae said there is no question of notifying petroleum products as demanded by some stakeholders. "We can't do it", he said emphatically.
He said there was an urgent need to expand gas pipelines across the country, noting that while it has been achieved only over 13000 km in India while China has already done it over 55000 km.
Mr Rae said there is a need for clarity in the objective which can be followed by a clear strategy.
He said there is no need for any more legislation as the sector is already over-legislated but still under-governed.
The secretary said there is also a need to expand CNG as it is better not only in terms of environment friendliness but also from import advantages. He also underlined the need for focussing on long term energy security instead of short term revenue creation.
Delivering the theme address, ORF Director Sanjay Joshi noted that while China has managed to tie up with diverse long term pipeline supplies from Central Asia, Myanmar and Russia, India, despite being surrounded by some of the most gas prolific countries, is yet to build its first transnational gas pipeline.
He said gas in 2012 accounted for a bare 9 percent of generating capacity, making India the only country which has seen the share of gas in its fuel basket decline in recent years.
Stressing the importance of market-influenced prices, as even stressed by the recent China Communist Party Plenum, Mr Joshi said lack of transparency in energy pricing creates opportunities for arbitrage and rents, giving birth to a political economy that creates the constituencies for its perpetuation.
He said the lack of strong and independent regulatory institutions was responsible for the failure of the half-hearted process of reform.
The CMD of the ONGC, Mr Sudhir Vasudheva, argued for the removal burdens placed on oil and gas companies in the form of huge subsidies and OIDB cess which make economic viability of products difficult.
He said the companies are facing many hurdles in operationalising plans to work towards ensuring energy security.
The day-long ORF seminar had sessions on "Upstream: Exploration and production regulations", "Midstream: Infrastructure regulations, and "Downstream: Refinery and marketing regulations" besides the inaugural and valedictory sessions. Policy-makers and experts from the government, industry and the sector participated in the event.