The Union cabinet has deferred decision on production-sharing contracts for 26 exploration blocks and 12 discovered oilfields till the installation of the new government in March.
The cabinet, which was to give a go-ahead for the signing of the contracts, is learnt to be of the view that the decision on these vital contracts should be postponed because of announcement of general elections.
It is of the view that only the new government would be competent to give approval to the petroleum ministrys proposal for making good the revenue loss to state governments because of the fixed royalty clause in the contracts for these oilfields from the cess being paid to the central government.
The royalty issue, which has a major bearing on the profitability of the projects, has to be finally settled before the contracts are signed. Moreover, the issue may require amendments to the Oilfields (production and development) Act 1948 which would need Parliaments approval.
Though the government had finalised the award of these exploration blocks and discovered oilfields to joint ventures in October 1996, not much headway was made in signing of production-sharing contracts.
The matter was referred to the group of ministers comprising deputy chairman of the Planning Commission, petroleum and finance ministers, in October 1997. The group of ministers gave its go-ahead to the petroleum ministry to finalise and sign contracts for the 26 exploration blocks for which awards had already been made.
The group of ministers also decided that the finance ministry should consider duty-free import of materials for petroleum operations by sub-contractors, a facility being enjoyed by the main contractors on the condition that the petroleum ministry comes up with a workable scheme to prevent misuse of this facility.
It was also decided to recommend to the Cabinet, approval for the award of the Ratna and R series of medium-sized discovered oilfields and 11 small fields to private consortia along with suitable compensation to the Oil and Natural Gas Corporation (ONGC) for past costs incurred to be borne out of the governments share of profit oil or through the administered price mechanism.
ONGC had made it clear to the group of ministers that joint ventures were welcome since these joint ventures may yield higher returns.
However, at the same time, ONGC wanted that it should be compensated for past exploration and development costs.
