KOLKATA (miningweekly.com) – India’s much-vaunted auction of oil and natural gas blocks, which were announced last month, has been virtually put on the back burner with the government unable to finalise a model contract for prospective domestic and foreign investors.

Senior government officials said that various Ministries have failed to arrive at a consensus on terms of engagements with successful bidders on whether to adopt a revenue-sharing or production-sharing agreement between the government and the operator.

Despite several rounds of inter-Ministerial meetings on the model agreement, it was not possible to arrive at a consensus within any definitive timeframe, and the announcement made last month to put 56 oil and natural gas blocks up for auction before the current financial year-end on March 31, had been almost scuttled, the official said.

Further, with the national elections slated within the next few months, government was cagey about taking a hasty policy decision, as the allocation of natural resources was already featuring strongly as a topic of electoral rhetoric, government officials said.

Earlier, the government had set up two expert committees to recommend the model contract for the National Exploration Licensing Policy (NELP) X, under which the oil and gas blocks would be auctioned. However, the two committees came out with conflicting recommendations with one favouring revenue sharing with successful bidders, while the other backed a production-sharing contract.

In the case of oil and gas blocks allocated to private investors earlier, oil companies were permitted to deduct costs of exploration and production before sharing profits with the government. However, this arrangement has become controversial, as some operators have increased the cost of exploration and production in order to lower the revenue sharing with government.

“Over the past month, since NELP X was announced, there have been several developments which have led to uncertainties over the policy,” former chairperson of oil and gas exploration major, ONGC Limited, R S Sharma has been quoted as saying in the local media.

Officials in the oil and natural gas Ministries said the legal challenges against government and operators of oil and gas blocks already in production, and the failure to evolve a consensus on future contracts, have made a complete overhaul of the hydrocarbon policy of the government an imperative, without which it would not be possible to move ahead with resource allocation with transparency and the preclusion of political and legal challenges.

But such a large-scale revamp would only be possible once a new government was at the helm as the present government, on its last legs, did not have the time, nor residual political capital to push major policy decisions, officials said.