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‘Bring DGH out of PetroMin’s ambit; pricing freedom for new discoveries’

Amitav Ranjan
This panel could also serve as a forum to "facilitate an open dialogue among the contracting parties on the same lines as presently practiced in the United Kingdom and Norway".

An Inter-Ministerial Committee (IMC), set up by Prime Minister Narendra Modi, has sounded out the need for the Directorate General of Hydrocarbons (DGH) to be brought out of the ambit of the Petroleum Ministry and made an independent regulator.

While recommending more autonomy for the DGH, the IMC has suggested that the "government may examine whether an independent upstream regulator is to be created at this stage" to improve the ease of doing business in oil and gas sector. The DGH, established in 1993, continues to be under the administrative control of the ministry even though it is entrusted with responsibilities of implementing all exploration licenses, monitoring contracts for discovered fields and exploration blocks, promoting investments and overseeing all exploration and production activities.

The panel has said that in case the government decides against creating a regulator, the DGH's authority should be "strengthened" as the quasi-regulator to ensure compliance of all terms and conditions of all approvals; to issue standard operation procedures (SOPs); and, act as a single interface between various departments and authorities for processing approvals and clearances.

In such a scenario, it has proposed that "an empowered mechanism consisting of representatives of concerned ministries and departments under the Cabinet Secretariat be constituted to coordinate and streamline the grant of approvals and clearances" thereby gnawing at the Petroleum Ministry's authority. It has also recommended that "checklist and guidelines be developed to reduce discretion" while putting in place SOPs for all approvals that would be logged on to an e-portal and processed thereunder without any interference of the government.

Disputes, if any, should also be taken away from the Petroleum Ministry's purview by creating a "committee of eminent persons/experts" for mediation of disputes between contracting parties and the government.

This panel could also serve as a forum to "facilitate an open dialogue among the contracting parties on the same lines as presently practiced in the United Kingdom and Norway". In order to avoid an additional layer of litigation, each party to the contract would have to agree in writing that "the decision of dispute resolution committee would be acceptable to them and that they will not initiate further arbitration or litigation".

These changes are easily implementable as Section 8 of the Oilfields Regulation and Development Act of 1948 allows the government to offload any of its power exercised under the ORDA to an officer or authority as specified in its gazette notification.

The committee's recommendations were accepted by the Petroleum Ministry end-January. However, it has to be translated into a Cabinet note for the Centre's approval before initiating an act to make the DGH a regulator. The committee, created by the PM at a review of oil and gas sector last October, is headed by Niti Aayog CEO Amitabh Kant. It was asked to delve on steps to improve oil and gas production from uncharted basins and producing fields discovered by national oil firms.

It comprises Cabinet Secretary P K Sinha; Aayog Vice Chairman Rajiv Kumar; Petroleum Secretary M M Kutty; DGH Director General V P Joy and ONGC Chairman and MD Shashi Shanker.