What's in a name?
A rose is a rose is a rose is a.... But would it smell as sweet by any other moniker? Well, if the petroleum ministry had its way, a rose would sooner wilt and wither than call itself anything else.
Take the case of Venugopal Dhoot, chairman of Videocon Petroleum Ltd. -- a partner in the Ravva field. When Dhoot decided to change the name of his company to Petrocon India Ltd. in May, 2002, he hadn't quite bargained for the fact that he'd have to wait a good two years before the petroleum ministry recognised the change of name. Dhoot's application was processed through two sets of legal opinion -- one from the law ministry and the other from private counsel R.S. Prabhu & Co. But that wasn't the end of the name-game for him.
These legal opinions then went through another level of torturous scrutiny within the petroleum ministry. A meeting was held on the subject by none less than the petroleum secretary himself, who insisted the change of name be inscribed on the production sharing contract (PSC) of the Rawa field through a formal amendment.This was despite the fact that both the law ministry and Prabhu & Co. had categorically opined there was no real requirement to do so; a straight-forward letter stating there has been a change of name would suffice.
The file was then forwarded to the minister and, after his approval obtained, an amendment had to be endorsed by all the signatories of the Ravva PSC, on a non-judicial stamp paper. This, of course, is an extreme example of how complicated the government's already-complex machinery can get on occasion. To be fair, the petroleum ministry may well have been erring on the side of abundant caution since the case involved Dhoot, the same man who had executed a Rs 1000 crore Debenture Trust Deed with the UTI by surreptitiously mortgaging his participating interest in the Ravva field. Dhoot's credibility, or lack of it, notwithstanding, this case is nonetheless illustrative of the exasperating rigmarole that applications from private companies for amendments to PSCs are subjected to.
A request for the transfer of participating interest in a block to another company elicits a thorough scrutiny by the Directorate General Hydrocarbons (DGH) before it is sent to the ministry for further verification. The law ministry is then roped in to oversee the amendments in the PSC and, of course, a decision is said to have formally been taken only after the express approval of the petroleum minister. This Byzantine process can take anywhere between a few weeks to a few months, before the file makes its way, at a snail pace, to the minister's desk, only to take the same intricate route back again. This, no doubt, does not factor variables of whether the concerned processing officer is on duty or on leave. Similar approvals are also required for applications seeking an extension of minimum work programmes beyond a particular time limit.
There are also occasions when the government could act arbitrarily: Recently, the petroleum ministry directed a retrospective audit of select PSCs -- despite a clear stipulation in the PSC that such audits cannot be conducted after a period of two years from the finalisation of accounts, on a suspicion that some of the companies may have inflated costs in an attempt to cut down on the government's take. There is no doubt that the ministry has to exercise a due amount of scrutiny and caution to ensure that rules are not flouted or taken advantage of but, equally, there has to be a degree of rationalisation and transparency in its intent.
Indeed, care has to be taken to ensure that the participating interests are transferred only to those companies which have the financial muscle and the competence to undertake the obligations enshrined in the PSC. Similarly, changes in work programmes require adequate vetting in order to ensure that original commitments are not flouted. And it has the right to investigate all expenses in a PSC in order to ensure that that it gets its share of profit petroleum. But surely the government has to be accountable for delays as well.
The attendant loss in the approval process can be counter-productive and can often cost more than precious time chasing the file as it travels through the labyrinthine decision-making process. It isn't as if the government hasn't realised that there is a need to cut down on red-tape. In fact, on occasion, extensions to PSCs can now be granted by the DGH and deadlines have now been set for the DGH to approve budget and production programmes.
While the petroleum ministry attempts to get its house in order on some of these issues, it continues to tighten the screws in other areas. In NELP-V, contractors will now have to deposit the amount notified by way of an audit exception to an escrow account before the due process of law is completed. Then again, the government has reserved the right to terminate a PSC even while legal proceedings are on. In the long run, there is no getting away from the fact that the government will have to get out of the business of approving every little hiccup in the PSC. Like in most countries, the powers will have to delegated to an independent regulator or an authority. The DGH can, perhaps, don this role, provided it is adequately empowered.
The government, as a stakeholder, cannot be the jury and the judge. But the big question is: Will the government be amenable to giving up its powers? Naivet apart, it is unlikely to see a sea-change in the near future. The very fact that the introduction of the Petroleum and Natural Gas Regulatory Board Bill in Parliament has been hanging in the air for so long -- a Bill which would lead to the appointment of an independent regulator in the downstream sector -- is a grim reminder of how thorny the path ahead is. Will the future turn rosy, or will one just have to be content with rose-tinted glasses?
A rose is a rose is a rose is a.... But would it smell as sweet by any other moniker? Well, if the petroleum ministry had its way, a rose would sooner wilt and wither than call itself anything else.
Take the case of Venugopal Dhoot, chairman of Videocon Petroleum Ltd. -- a partner in the Ravva field. When Dhoot decided to change the name of his company to Petrocon India Ltd. in May, 2002, he hadn't quite bargained for the fact that he'd have to wait a good two years before the petroleum ministry recognised the change of name. Dhoot's application was processed through two sets of legal opinion -- one from the law ministry and the other from private counsel R.S. Prabhu & Co. But that wasn't the end of the name-game for him.
These legal opinions then went through another level of torturous scrutiny within the petroleum ministry. A meeting was held on the subject by none less than the petroleum secretary himself, who insisted the change of name be inscribed on the production sharing contract (PSC) of the Rawa field through a formal amendment.This was despite the fact that both the law ministry and Prabhu & Co. had categorically opined there was no real requirement to do so; a straight-forward letter stating there has been a change of name would suffice.
The file was then forwarded to the minister and, after his approval obtained, an amendment had to be endorsed by all the signatories of the Ravva PSC, on a non-judicial stamp paper. This, of course, is an extreme example of how complicated the government's already-complex machinery can get on occasion. To be fair, the petroleum ministry may well have been erring on the side of abundant caution since the case involved Dhoot, the same man who had executed a Rs 1000 crore Debenture Trust Deed with the UTI by surreptitiously mortgaging his participating interest in the Ravva field. Dhoot's credibility, or lack of it, notwithstanding, this case is nonetheless illustrative of the exasperating rigmarole that applications from private companies for amendments to PSCs are subjected to.
A request for the transfer of participating interest in a block to another company elicits a thorough scrutiny by the Directorate General Hydrocarbons (DGH) before it is sent to the ministry for further verification. The law ministry is then roped in to oversee the amendments in the PSC and, of course, a decision is said to have formally been taken only after the express approval of the petroleum minister. This Byzantine process can take anywhere between a few weeks to a few months, before the file makes its way, at a snail pace, to the minister's desk, only to take the same intricate route back again. This, no doubt, does not factor variables of whether the concerned processing officer is on duty or on leave. Similar approvals are also required for applications seeking an extension of minimum work programmes beyond a particular time limit.
There are also occasions when the government could act arbitrarily: Recently, the petroleum ministry directed a retrospective audit of select PSCs -- despite a clear stipulation in the PSC that such audits cannot be conducted after a period of two years from the finalisation of accounts, on a suspicion that some of the companies may have inflated costs in an attempt to cut down on the government's take. There is no doubt that the ministry has to exercise a due amount of scrutiny and caution to ensure that rules are not flouted or taken advantage of but, equally, there has to be a degree of rationalisation and transparency in its intent.
Indeed, care has to be taken to ensure that the participating interests are transferred only to those companies which have the financial muscle and the competence to undertake the obligations enshrined in the PSC. Similarly, changes in work programmes require adequate vetting in order to ensure that original commitments are not flouted. And it has the right to investigate all expenses in a PSC in order to ensure that that it gets its share of profit petroleum. But surely the government has to be accountable for delays as well.
The attendant loss in the approval process can be counter-productive and can often cost more than precious time chasing the file as it travels through the labyrinthine decision-making process. It isn't as if the government hasn't realised that there is a need to cut down on red-tape. In fact, on occasion, extensions to PSCs can now be granted by the DGH and deadlines have now been set for the DGH to approve budget and production programmes.
While the petroleum ministry attempts to get its house in order on some of these issues, it continues to tighten the screws in other areas. In NELP-V, contractors will now have to deposit the amount notified by way of an audit exception to an escrow account before the due process of law is completed. Then again, the government has reserved the right to terminate a PSC even while legal proceedings are on. In the long run, there is no getting away from the fact that the government will have to get out of the business of approving every little hiccup in the PSC. Like in most countries, the powers will have to delegated to an independent regulator or an authority. The DGH can, perhaps, don this role, provided it is adequately empowered.
The government, as a stakeholder, cannot be the jury and the judge. But the big question is: Will the government be amenable to giving up its powers? Naivet apart, it is unlikely to see a sea-change in the near future. The very fact that the introduction of the Petroleum and Natural Gas Regulatory Board Bill in Parliament has been hanging in the air for so long -- a Bill which would lead to the appointment of an independent regulator in the downstream sector -- is a grim reminder of how thorny the path ahead is. Will the future turn rosy, or will one just have to be content with rose-tinted glasses?
Via|IndianPetro
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