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Kelkar committee backs old oil regime, government officials say it's against Rangarajan's model

Officials said Kelkar was appointed as a head of a committee by Oil Minister Veerappa Moily to recommend ways to increase oil and gas output.

, ET Bureau|
Updated: Jan 14, 2014, 03.01 AM IST
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Officials said Kelkar was appointed as a head of a committee by Oil Minister Veerappa Moily to recommend ways to increase oil and gas output.
Officials said Kelkar was appointed as a head of a committee by Oil Minister Veerappa Moily to recommend ways to increase oil and gas output.
NEW DELHI: Top government officials have questioned the jurisdiction of the Vijay Kelkar committee in challenging the Rangarajan panel's recommendations for a new fiscal regime for oilfield contracts that is much more transparent but less attractive for exploration firms.

Officials said Kelkar, who was petroleum secretary in the 1990s, was appointed as a head of a committee by Oil Minister Veerappa Moily to recommend ways to increase oil and gas output.

Rangarajan had proposed ending the current regime in which a company recovers its cost before sharing profit with the government. He suggested a transparent system of revenue sharing from the first day of oil or gas output. The proposed system would preclude the kind of dispute that Reliance Industries has with the government.

The oil industry however is in favour of the prevailing system, which Kelkar has also backed.

"Review of fiscal regime for auction of oil and gas exploration blocks is neither the mandate of the Kelkar committee, nor it is part of its (ToR) terms of reference. The oil ministry has already circulated a draft Cabinet note to change the existing regime with a revenue sharing model. Just before the expected 10th auction round, the Kelkar committee has hurriedly pushed the idea to retain the existing regime, by calling it more investor-friendly.

The Cabinet will take a final call," a senior government official with direct knowledge of the matter told ET. Moily said the cabinet would take a call on the matter.

Government officials expressed dismay on the Kelkar committee's observations.

"The government nominee in the committee (Director General of Hydrocarbons RN Choubey) has expressed strong reservations in black and white," a member in the committee said requesting anonymity. The other member who gave dissent was SV Rao, former director for exploration at state-run ONGC.

"The committee has not given any recommendation on the model suggested by Dr Rangarajan. It has just made observations," the member said.

A senior oil ministry official said, "The ministry has just received the first report of the Kelkar committee. Its term of reference is also wide. We must first read the recommendations before concluding anything".

The Kelkar committee, which was constituted by Moily in March last year "to prepare a roadmap for enhancing domestic production of oil and gas and sustainable reduction in import dependency by 2030," does not have specific term of reference to review existing or proposed model, officials said.

But the Rangarajan panel was having the specific mandate, when PM had constituted it in May 2012, officials said.

According to the Prime Minister's Office website, the Rangarajan committee's terms of reference included, "Review of the existing PSCs, including in respect of the current profit-sharing mechanism with the pre-tax investment multiple (PTIM) as the base parameter.

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