To bring down the nation’s oil import bill Kelkar recommended following reforms in oil sector:
Institutional Reforms:
- Create an empowered Cabinet Committee on Energy for policy formulation and integration of energy related issues; will remove policy paralysis.
- Make DGH an independent regulator for upstream oil & gas sector on the lines of SEBI; more teeth to DGH to resolve issues.
- Create a national databank of basins; enhance transparency.
- Create an independent cadre of staff for downstream regulator (PNGRB); stability to PNGRB.
Fiscal:
- Cover oil & gas under GST to simplify & standardize taxation norms ensuring similar country wide pricing.
- Extend definition of mineral oil as used in Oilfields Regulation & Development act to IT act-1965; to standardize taxation.
Pricing:
- Market linked pricing for natural gas to incentivize higher exploration & production making stranded fields viable; increased domestic production will reduce imports.
- Wave off custom duty on imported LNG to boost demand in general
Contractual:
- Favored PSC over RSC due to misaligned risk return structure of the latter; RSC often a cause for lower level of production as riskier fields in deeper waters are not bided & exploited.
- Ensure absence of retrospective clauses/changes in contracts to bring clarity in contracts.
- Extension of contract tenure up to economic life of asset (oil field) to boost investor sentiments.
Policy:
- Bring open acreage licensing policy by 2016 to allow upstream companies to bid for any oil & gas block without waiting for announcement of bidding under NELP regime.
- To boost investment in exploration allow equity participation to foreign firms in nominated fields.
The above recommendations can be thoughtfully implemented to reduce country’s oil import bill.