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[Economy] Rangarajan Gas Pricing, Production Sharing Contract (PSC), APM, Non-APM, issues, recommendations Mrunal
[Economy] Rangarajan Gas Pricing, Production Sharing Contract (PSC), APM, Non-APM, issues,
recommendations
1.
2.
3.
4.
5.
6.
7.
8.
Introduction
What is Production Sharing Contract(PSCs) ?
Royalty-tax regime
Problems faced by Oil/Gas exploration companies
CAG-Audit
Gas Pricing Mechanism
1. Administered Pricing Mechanism (APM)
2. Non-APM
Criticism on Rangas gas pricing
Summary points
+30
Introduction
Rangarajan is a noted economist, ex-Governer of RBI, ex-MP, Chairman of 12th Finance Commission and Chairman of Economic
Advisory Council to the PM.
Mohan had appointed Rangarajan Committee to look into following matters
1. Production sharing contracts with oil n gas exploration companies
2. Contentious issues between those companies vs Government.
3. How to decide the Price of domestically produced natural gas?
Rangarajan submitted report in December, 2012. It mainly revolves around following issues
1.
2.
3.
4.
Royalty-tax regime
Under this system:
1. From the total profit from selling the oil, a fixed royalty is to be paid to the govt.
2. After royalty is paid, the rest of revenue is shared by the govt and contractor.
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2. After royalty is paid, the rest of revenue is shared by the govt and contractor.
3. Government should allocate block to a company that offers maximum share from profit.
Advantages of the system are:
1. Encourages the contractor to reduce costs.
2. In case of price rise, the contractor doesnt get windfall gains.
3. Government gets more money = more money for MNREGA, food security.
1. Policy Issues
1. Environment ministry cancelled the NOCs given to areas under the oil blocks.
2. Contractors have difficulty in oil-exploration in North East and Naxal affected regions.
3. Once oil is found, contract would want to dig more wells but he wont be allowed under the license
granted.
2.Management
Issues
1. If there are merger/acquisitions of companies, the Production sharing contract doesnt recognize
them.
2. In the difficult terrain, it takes many years to complete survey, research, exploration. But
production sharing contracts allow only 8 years to finish this.
3. Contractual
Issues
For Policy Related Issues Make an Inter-Ministerial Committee to iron out the issues.
To solve other issues, there is already an Empowered Committee of Secretaries(ECS). Give them more powers to resolve
these issues.
For companies exploring oil / gas in difficult terrains, should be given following extensions:
Currently Rangarajan wants
Tax holiday
7 years
10 years
10 years.
#3:CAG-Audit
Another controversial issue is : CAG auditing. Oil/ Gas exploration companies like Reliance, want following things:
1. CAG should only check our financial accounts, he should not do performance auditing. (because Production sharing
contract doesnt mention performance auditing).
2. CAG should not reveal details of audit to public( not even in Parliament) because that leads to bad publicity for our
company.
3. Audit should be within 2 years. If later, then under permission of the contractor.
Ranga on CAG
The CAG is bound by the constitution to share all its audit with the Parliament. Just because some private company doesnt
want it, we cant change that!
CAG is fully empowered to carry out audits. (including performance audits)
If a block has high value, then CAG himself should audit it.
If the block has low value, then CAG should outsource this auditing work to others. (reputed private audit firms selected by
CAG)
2. Non-APM
This is applied to:
Companies .
Imported LNG. (because Imported gas comes at a price agreed
This is the price at which gas is provided to
upon by the 2 countries in agreement.)
fertilizer, power companies, etc. (so if National
Gas obtained from National Exploration and Licensing Policy
company
makes
losses,
then
Government
pay
(NELP) era and pre-NELP era gas fields. (because Pre-NELP era
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(NELP) era and pre-NELP era gas fields. (because Pre-NELP era
licenses sell gas according to the Production Sharing Contracts
signed.)
Not yet regulated.
Since there are ^two mechanisms, the price of gas is neither constant nor predictable in Indian market.
Ranga on GAS
Rangarajan says, first you gather two values.
Value #1
Value #2
Then, take average of values #1 + #2. Thatll be the final pricing for gas in the country.
Summary points
Feature
Recommendation of Rangarajan
1. PSC
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2. Issues
3. Audit
4. Pricing for
domestically
produced Gas
31 comments to [Economy] Rangarajan Gas Pricing, Production Sharing Contract (PSC), APM,
Non-APM, issues, recommendations
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SABYASACHI MUKHARJEE
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MRUNAL SIR,
I HAVE A MINOR DOUBT RELATED TO THE ISSUE OF COMPULSORY ENGLISH QUESTION IN THE PRELIMS,IS IT MANDATORY
TO QUALIFY IN THE 8 COMPULSORY QUESTIONS WHICH IS SAME FOR BOTH HINDI AND ENGLISH MEDIUM STUDENTS MANY
OF THE PEOPLE ARE SAYING THAT IF U R GETTING MORE THAN THE QUALIFYING MARKS BUT FAILED TO GET THE MINIMUM
QUALIFYING MARKS IN THOSE 8 QUESTIONS U WILL BE DISQUALIFIED .
SIR ,KINDLY CLEARIFY MY DOUBT
Rakesh
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I too have same doubt, have heard from some so called Pandits of UPSC. Let us see what is Mrunals Opinion.
Mrunal
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not necessary. It was nowhere mentioned in the UPSC 2012 notification.
TRA
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Thanks a lot Sir.
had been following every article in editorial and op-ed of hindu about rangarajan committee report but have comprehended it actually
today after reading your article.
Praghu
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thank u sir. was waiting 4 this article.
aaditya singh
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Sir in non-APMthis applies to both NELP era and pre NELP erahow??
dr .ramesh krishnan
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thanks sir.ur not just good but best
csl80
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[Economy] Rangarajan Gas Pricing, Production Sharing Contract (PSC), APM, Non-APM, issues, recommendations Mrunal
csl80
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look at the press conference pic has has k haalat kharab ho gayi hahahaha keep the good work going mrunal
Dhananjay
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it was quite helpful, easy to understand..but missed the question section
SIDHARTHA
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http://www.hindustantimes.com/India-news/NewDelhi/Civil-services-exam-pattern-may-be-changed/Article1-1014097.aspx
plz friends view this
this article is v informative
plz Mrunal Sir xplain the special majority in polity with examples
vishnu
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As usual mrunal bhaiyya has written a master piece
vishnu
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Sir can u explain how supreme court is handling inter state water dispute. Isnt is beyond its jurisdiction???
GURMEET
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PLZ TELL ME WHETHER OPTIONALS WUD BE REMOVED FROM THIS YEAR OR NOT.WHEN WUD B NOTIF. OUT.
Himanshu Srivastava
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Hi Mrunal,
Thanks a lot for the great article.
I have a doubt in some points. Request you to check/correct the following points:1. NELP is New Exploration and Licensing Policy (not National)
2. Policy issues It is not true that if oil is found the contractor wont be allowed to dig more wells. If the volume of the oil/gas discovery
is good enough to allow the techno economic drilling of further wells, the contractor is allowed to do so (in fact encouraged).
3. Management issues PSC does recognise the merger/acquisition of companies. eg:- PSC recognised the acquisition of 30% of
RILs share by BP in KG-D6 block.
sandeep
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csat paper 2 good books list..
MANI
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hi,
anyone help me.
If LINGER is written as 123456 and FORCE is written as 56789. Then how to write FIERCE?
A. 345667
B. 456678
C. 345677
D. 556789
hapo
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may be (b) er=56(as er and 56 are common); ling=1234; foc=789
fierce=er+fc+e+i={56+78+6+4} shuffled=456678
a and c have 3 and 4 but only one letter i comes form ling
d doesnt have any as it should contain atleast one for 1234
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mANI
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how could you split FIERCE like this?
vips
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defintely b. er means 56 or 65 1from foc so 3 and 2 from ling so 78, only option b matches
vips
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1 from foc so 4 not 3
mANI
sorry.. cant get u!
Raam.K
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Dude, the answer is D.check for the common letters in the word FORCE and FIERCE.its pretty obvious.
manukoleth
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Come on! how can it be D. Other than R&E the other letters in FORCE & FIERCE is FOC and FIC respectively so 789
together can never come as it is evident that the letter I is not in 789 and it is in 1234 and hence D can never be the option.
As you can R & E are 56 [or 65] and hence C too cannot be the option because E repeats 2 times in FIERCE and hence an
option of 55 or 66 must be present.
Both A & B option qualify on this ground but. Now only one letter from the word LINGER [other that E & R] is taken in FIERCE
ie I so only one digit from 1234 must be present in the option. In Option A both 3 & 4 is present but B has just one digit that is
4 and Hence option B is the right option. Final Result-Option B
amritpal
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Thx mrunal. been waiting for this..
Brijesh
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Thanks a lot for your lucid explanation as always. One small clarification req. few points under the head royalty-tax regime. Point No.1
stated From the total profit from selling the oil, a fixed royalty is to be paid to the govt. Is it total revenue from selling the oil, right? and
Point No.3 has stated Government should allocate block to a company that offers maximum share from profit is it maximum share from
revenue?
Shakti Swami
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Again an applaudable work Sir..keep postingkudos
Pradeep Kar
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Such a complicated subject, Gas Pricing formula, the contentions between govt and exploration companies, and to translate the details
of it in a lucid, explicit manner can be done only by Mrunal. Thank You so much for this article. I have been gathering pieces of
information on this topic, as newspaper do not cover the basics. Your article is comprehensive.
Jaan
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Jaan
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I am not able to LOGIN DISCUSSIONS MRUNAL.. KINDLY HELP ME OUT. It says wrong password..
Jaan
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UPSC MAINS EXPECTED PATTERN FROM 2013
OLD PATTERN MAINS NEW PATTERN MAINS STATUS
PAPERS PAPERS
GENERAL STUDIES I CURRENT EVENTS OF NATIONAL Changed
IMPORTANCE
GENERAL STUDIES II INDIAN CULTURE & HISTORY Changed
FIRST OPTIONAL I GEOGRAPHY OF INDIA Changed
FIRST SUBJECT II INDIAN ECONOMY Changed
SECOND OPTIONAL I GENERAL SCIENCE Changed
SECOND OPTIONAL II INDIAN POLITY AND Changed
INTERNATIONAL RELATIONS Changed
Rahul
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what to read from frontline and kurkshetra sir?
[Result] UPSC CSE Mains 2012 result is out, interviews start from
4th March
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