The oil and gas sector in India has been a victim of poor policies. The woes of the sector are not just limited to regulated pricing regime and adhoc subsidy sharing mechanism. The lack of clear and upfront policies in the upstream segment is one of the main reasons why the potential in the exploration and production remains unharnessed. While the sector has in the recent times witnessed some reforms such as doubling of gas prices and phased deregulation of diesel. However, as an article in Economic Times suggests, all these steps are unlikely to be of much help unless there is an overhaul in the regulatory regime in the upstream sector.
One of the most talked about shift is the move from Production sharing to revenue sharing. In the former, the exploring and production companies are allowed to recover costs before sharing their profits with the government. However, the practice has led to gold plating of costs where the explorer has been alleged to inflate the costs.
Also, because of the lack of clear policies or enforcement, there have been cases where the operator has not delivered on the output that it had committed as per the Production sharing contract. As a result, the country's precious and strategic resources have been taken for granted.
Energy security is crucial for any successful economy. While economies like US have taken a huge leap with shale gas discovery, the existing gas supplies in India are drying up. It's time that we lay out comprehensive policies on good field practices to plug the huge gap between domestic demand and supply.