THE Rangarajan Panel set up to look into the
Production Sharing Contract (PSC) Mechanism in petroleum industry, has called
for extenstion of tax holiday period from seven years to 10 years to blocks
having a substantial portion involving drilling offshore at a depth of
more than 1,500 metres, since cost of a single well can be as high as US$
150 million.
Further,
the committee has recommended extending the timeframe for exploration in
future PSCs for frontier, deep-water (offshore, at more than 400 m depth)
and ultra-deep-water (offshore, at more than 1,500 m depth) blocks from eight
years currently, to ten years.
Apart
from resolution of problems currently experienced in contract management
through the proposed fiscal regime under new PSCs, the committee has suggested
two mechanisms for improving progress of exploration and development under
existing PSCs. For policy related issues, it has suggested the setting up
of a Secretary-level inter-ministerial committee to suggest policy solutions.
For issues involving condonation of delay on the part of the contractor in
preparing for and seeking approvals, and for minor technical issues, the
mandate of the existing Empowered Committee of Secretaries (ECS) can be expanded.
The ECS has earlier been empowered, with CCEA approval, to condone delays
in the exploration phase only.
Audit
Issues
currently being raised in audit would no longer arise under the proposed
fiscal regime for new PSCs. Apart from this, after consulting CAG, it has
been recommended that the list of blocks be periodically made available to
the CAG for selecting those that it would directly audit. CAG would select
blocks on the basis of financial materiality, and would focus on blocks in
the exploration and development phase, when costs incurred are higher. Other
blocks would be ordinarily audited by CAG-empanelled auditors, although CAG
would continue to have its statutory freedom to directly audit even these.
Further, it has been recommended that CAG perform the audit within two years
of the financial year under audit, as prescribed under the PSC. Also, for
PSCs beyond a high financial threshold, a concurrent audit mechanism may
be considered.
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