Government deregulates domestic crude oil market

NEW DELHI: The government on Wednesday deregulated the sale of domestically-produced crude oil, giving companies autonomy to sell their produce to whomever they want. The decision, experts believe, is likely to attract many national and international companies for exploration and production in India. Currently, it is the central government that decides which oil refinery gets how much crude from each producer.

“The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved ‘deregulation of sale of domestically produced crude oil’, whereby the government has decided to cease allocation of crude oil and condensate with effect from October 1, 2022.

This will ensure marketing freedom for all Exploration and Production (E&P) operators,” said the petroleum ministry in a press note.  Following the decision, the condition in the production sharing contracts (PSCs) to sell crude oil to the government or its nominee or government companies will accordingly be waived off.

Thus, all exploration and production companies will now be free to sell crude oil from their fields in the domestic market. “Government revenues like royalty, cess, etc. will continue to be calculated on a uniform basis across all contracts. As earlier, exports will not be permissible,” said the ministry.

The decision was hailed by the experts and they said it would increase revenue for the government. Anil Agarwal, chairman of Vedanta, opined India has vast reserves of hydrocarbons and can produce oil and gas at the lowest cost. “Rationalisation of taxes and levies and longer lease of mines, in line with global standards, along with self-certification will help boost India’s domestic production. This decision will attract many national and international companies to do exploration and production in India,” he said.

Sourav Mitra, director of energy at CRISIL, said the decision is going to benefit both the industry players and the government. “Market-based pricing of crude oil and its condensates will encourage investments in the E&P sector and boost indigenous crude oil output aligning with the ‘Aatmanirbhar Bharat’ vision of the government,” said Mitra.