With an aim to revive interest in oil and gas exploration by simplifying rules, the Oil Ministry is considering proposal to replace the controversial Production Sharing Contracts (PSC) with simpler revenue-sharing regime.
Earlier, a committee headed by Dr C Rangarajan had suggested moving to a revenue sharing regime under which companies bid upfront the quantity of oil and gas they will share with the government at different stages of production as well as at different rates for winning exploration acreage. The production levels for onland, shallow offshore and deepwater have been proposed at different tranches. Under model revenue sharing contract (MRSC), revenue to be shared with the government include all amounts accrued in relation to petroleum produced and saved in a month remaining after deducting royalty payments required to be made by the contractor, in the relevant month. Marketing margin charged by contractor shall be included to calculate this revenue. Oil Ministry sought comments by September 10 on MRSC.
MRSC will replace the current practice of companies getting blocks by bidding maximum work programme and then recovering all of their investment before sharing profits with the government. Production sharing model was also criticized by the CAG saying that it encouraged companies to keep raising cost so as to postpone higher share of profits to the government.