The job of clearing regulatory thickets lies solely with the Government operating within well-defined time targets.
For a country running a massive energy import bill that is the main cause of a widening current account deficit in its balance of payments, it is completely inexcusable that domestic exploration and production activities are stuck on account of administrative clearances not coming through. That these delays relate to hydrocarbon blocks already awarded under various rounds of the New Exploration Licensing Policy (NELP) makes it doubly so, besides being a poor advertisement for investment interest in the energy sector. Currently, there are as many as 52 blocks where contractors are not able to start any work because of not getting statutory approvals, whether from the Defence and Environment ministries, Department of Space or State Governments. The contractors for these 52 blocks include a host of private players, from Reliance Industries, BHP Billiton, Cairn Energy and British Gas, and even the state-owned ONGC.
It raises a fundamental question: Why were these blocks put on auction without the requisite clearances in the first place? It is a moot point whether the companies that bid in the NELP rounds had actually anticipated objections from various departments – about the blocks on offer being in the vicinity of naval exercise, missile firing or satellite launching sites; their development presenting issues relating to marine ecology or international maritime boundary limits, and so on. Had they known these, it is unlikely they would have bid at all. Either way, we have a situation where out of the 113 oil and gas discoveries made in the NELP blocks so far, only six have been brought under production. In most blocks, even basic 3D seismic survey work has not been conducted for want of regulatory approvals. It is not just the operators who have to bear the cost of all these delays. Ultimately, it is the country that pays for not expeditiously exploring and developing its sedimentary basins, in the form of galloping oil imports.
The lesson from this is simple. Companies, especially in the private sector, can be expected to take on project risks so long as they are purely commercial or business in nature. This holds not just with regard to drilling of wells that may or may not yield oil and gas, but also projections of traffic or toll revenues in highway projects that may or may not materialise. But to expect them to deal with uncertainties over obtaining administrative clearances from myriad arms of the Government is too much. The job of clearing regulatory thickets lies solely with the Government. Thankfully, a start has been made, with the newly constituted Cabinet Committee on Investment setting a one-month’s time for the Petroleum and Defence ministries to resolve problems over permitting contractors to undertake work in 39 blocks. But in future, no NELP block, highway or other infrastructure project should be bid out without all the prior necessary approvals in place.
Keywords: energy import bill, cause for current account deficit, balance of payments, domestic exploration, single window clearance, oil exploration, NELP
Comments:
It is disheartening to note that despite having a vast oil and natural gas reserve, our country is suffering from systemic problems due to which the exploration process is badly suffering. This is also costing our economy very badly, not only because we are footing a huge oil bill due to heavy import and thus contributing adversely to our ever growing current account deficit but also the delay in implementation of projects is resulting in cost overrun. A study report observes that with the size of our growing economy with every passing day, demand for oil is expected to grow at 4% every year for the next 20 years in comparison with the rest of the world's 2%. Accordingly our administrative shortcomings need to go and get substituted by a commercial and professional approach which can build a strong confidence among contractors and stakeholders. After all, we have to ultimately have a robust energy security regime in place.
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