NELP's 10th round auction unlikely under UPA regime

In all likelihood, auctions for oil and gas blocks under the New Exploration Licensing Policy 's (NELP) 10th round will not take place during the term of the current United Progressive Alliance (UPA) government. The reason is a lack of consensus among various arms of the government.

The Planning Commission has opposed the petroleum ministry's proposal to change the fiscal regime for auctions. Moreover, the government machinery it is unlikely to keep up with the Election Commission. The poll panel is likely to announce the dates for General Election after the ongoing session of Parliament gets over on February 21.

Petroleum Minister M. Veerappa Moily is pushing for a new revenue sharing model that is linked to production. It is considered much more transparent and performance linked. This is based on the recommendations of C. Rangarajan, Chairman of the Prime Minister's Economic Affairs Council. The Ministry of Finance is backing this.

However, the Planning Commission wants to stick to the existing rules, where operators are allowed to recover their cost before sharing their revenue with the government. The existing regime requires a close scrutiny of costs and incentives claimed by the operators. The Plan panel was backed by a committee led by Finance Commission Chairman Vijay Kelkar.

The logic behind Moily's stand is that the new model would reduce the chances of corruption and gold plating of the cost, along with reducing the policing of the operators. This has been one of the contentious issues in the fight between Reliance Industries and the government on the falling gas production from the KG-D6 block.

Recently, the Plan Panel wrote back to the petroleum ministry to not rush the auctions. "It is impractical to invite bids within one month," says a senior official from the petroleum ministry. The Directorate General of Hydrocarbon (DGH), the upstream regulator, is still working on finalising the blocks. Of the 46 blocks offered on January 12 at the Petrotech conference by Moily, four blocks have already been withdrawn after the defence ministry raised objections.

Moreover, a DGH team is still working to include some more blocks for the auctions. This would take 10 more days, says a DGH official. It is very likely that the agenda for the 10th round of NELP might not come for the Cabinet's consideration on February 15, says the petroleum ministry official.  

The DGH will come forward seeking bids for developing the national data repository, a basic ingredient required to switch over to the open acreage licensing policy (OALP). Moily wants to replace the NELP rounds with the OALP regime, giving the operators better leveraging of Indian oil and gas blocks. In this new regime, the operators would not have to wait for NELP rounds but can carve the blocks themselves and approach the DGH for requisite permissions. "This too will take time," says the DGH official. "At least an year."