Ratna consortium angry at new government terms

Vol 9, PW 2 (04 May 05) People & Policy
     

Imagine this.

You are awarded a discovered field nine years ago. At the time of the award you are liable to pay Rs900 ($20) cess (tax) on a tonne of produced oil and Rs528 ($12) per tonne royalty.

Nine years later, you still havent signed the PSC, for one reason or the other. Then, out of nowhere, the government says you have to pay cess at Rs1800 ($40) per tonne and royalty at 10%, currently equivalent to Rs1250 ($28) per tonne.

More, it tells you that you must agree to the new terms within ten days! Sounds absurd It is, but on 22nd April thats exactly what the powerful Negotiating Team of Secretaries told the consortium of Premier Oil (10%), Essar Oil (50%) and ONGC (40%) about the Ratna and R Series of oilfields, which it was awarded on 12th March 1996. A source tells us the NTS wanted the consortium to communicate its confirmation of the new terms by 2nd May or see the file resume its journey on the bureaucratic merry-go-round.

If theres a clean confirmation there is no need to go to the NTS again and the letters will go to the law ministry (for a date for the PSC), a source tells us. But if there are deviations the case will be sent to the NTS again.

Unsurprisingly, the consortium is furious. This is going too far, a source tells us.

Chances of them receiving an unconditional confirmation are remote. Doubling of cess and royalty, we are told, turns upside down the economics of the Ratna field development.

Anger is also directed against the government for violating the fiscal stability clause in the PSC, which although unsigned, was initialled in April 2001. Is the government keeping its word It is a matter of trust.

We are told each member of the Ratna consortium will be severely hit by this change in proportion to their participating interest. Nobody can be expected to confirm acceptance of such huge negative conditions.