Reliance's 5-point wish list to reform upstream sector

Vol 5, PW 24 (30 Jan 02) People & Policy

EVERYONE IN INDIA knows Reliance has the power to get things done, so when India's largest private oil and gas explorer suggests reform of the upstream sector, people sit up and take note.

In a presentation to the 4th Indian Oil & Gas Conference in Delhi on 16th January, P.M Prasad, President of Reliance's petroleum business, listed five areas for potential future reform.

Swapping of work programme: "As we acquire more and more data, it may so happen that some blocks would justify additional investment over the committed work programme, whereas, investment beyond a certain level in other blocks may not be technically justified. Therefore, we feel that the contractor should be allowed to swap unfulfilled work programme in one block against excess work performed in another block." Infrastructure status: Tax benefits allowed for the infrastructure sector should also be extended to exploration and production business as it has already been given the status of infrastructure.

"This involves various sections of the Income Tax Act, for instance, (i) benefit given under Section 10(23G) along with removal of dividend distribution tax for infrastructure companies (Section 115'O'), and (ii) extending the 7-year tax holiday to a 10 year period (Section 80-iB)" Removal of ring fencing for cost recovery between various blocks: If a contractor has been awarded a number of blocks, the contract cost incurred in "unsuccessful" blocks should be allowed to be recovered from other "successful" blocks. This will encourage companies to bid for less attractive blocks also Incentives for operational efficiency: " Contractor who shows efficiency in its operations (reduction in operating expenses/bbl) should be rewarded with a share of the savings" Single window clearance: "The current PSC mechanism requires an operator to obtain various clearances, permits, approvals from different governmental agencies in carrying out petroleum operations.

This is time and cost consuming and also leads to frustrating delays at various levels. The concept of single window clearance will expedite the project and reduce costs"