Mumbai, Oct. 18: The government on Monday sought to provide a comfort level to prospective bidders on marketing freedom and contentious tax related issues. On marketing freedom, it said that it would stand by the freedom enshrined in the production sharing contracts (PSC) with the operators in the NELP blocks. The Supreme Court judgement provides for price discovery on arms length basis through the transparent competitive bid process.
This was stressed by the big three in the oil ministry, Union minister for petroleum and natural gas, Mr Murli Deora, the union minister of state, Mr Jitin Prasada, and the petroleum secretary, Mr S. Sundareshan, at the first road show of the NELP IX in Mumbai on Monday. Thirty-four blocks are on offer of which eight are deep water blocks, seven shallow and 19 onland blocks over an area of 88,807 sq kms.
There had been an undercurrent of uncertainty over the marketing freedom and tax issues and Mr Sundareshan dispelled this, saying the KG Basin gas price was not fixed by the government but through the price discovery at arms length. They later came to the government for approval.
On the tax issue, he said there is no ambiguity and taxes and incentives under the new Direct Tax Code will be investment and not profit oriented.
Mr Prasada said for deep water and frontier areas exploration, new incentives have been provided like extending the initial exploration period of five years and total exploration to eight years; waiving the mandatory 2D seismic work programme in case of deep water frontier areas, and increasing the ceiling limit for procurement procedures of goods and services. A major demand of the exploration companies is the elimination of service tax which they have been trying for in the last three years. The 10.3 per cent tax covers services like drilling, cementing etc they say accounts for 65-70 per cent of the costs.
The ministry or petroleum and natural gas will sign memoranda of understanding with the United States during the visit of the President Mr Barak Obama, to India for sharing data on shale gas. Mr Deora said that the shale gas basins have been identified and discussions are on with world experts.
The minister also said that the government is working on an open acerage license policy and to put in place a depository. It is expected to be ready in a year and will eliminate the need for the NELP rounds.