Cabinet relaxes NELP, pre­-NELP pact rules

Why in the news ?
  • The Cabinet Committee has approved the policy framework for streamlining the operations of Production Sharing Contracts (PSCs) for increased domestic production of hydrocarbon resources.
Details
  • Based on recommendations in 'Hydrocarbon Vision 2030 for North East', Government has extended timelines for exploration and appraisal period in operational blocks of North Eastern region of India considering geographical, environmental and logistical challenges.
  • The exploration period has been increased by two years and appraisal period by one year.
  • Further, to stimulate natural gas production in NER, Government has also allowed marketing including pricing freedom for natural gas to be produced from discoveries which are yet to commence production as on 1st July, 2018.
  • PSC blocks in NER will be benefited from this special dispensation.
  • In addition, tax benefits under Section 42 of the Income Tax Act, 1961, will now be applicable prospectively to operational blocks under pre-NELP discovered fields for the extended period of contract under the PSC extension policy of 2016.
  • Section 42 of Income Tax allows the companies to claim 100% of expenditure incurred under a PSC as tax deductible for computing taxable income in the same year. While signing PSC of Pre-NELP discovered fields.
NELP
  • New Exploration Licensing Policy (NELP) is a policy adopted by Government of India in 1997 indicating the new contractual and fiscal model for award of hydrocarbon acreages towards exploration and production (E&P).
  • The main objective of NELP was to attract significant risk capital from Indian and Foreign companies, state of part technologies, new geological concepts and best management practices to explore oil and gas resources in the country to meet rising demands of oil and gas.
  • 100% Foreign Direct Investment (FDI) is allowed under NELP
  • No mandatory state participation through ONGC/OIL or any carried interest of the Government.
  • Blocks to be awarded through open international competitive bidding
  • Royalty at the rate of 12.5% for the onland areas and 10% for offshore areas.
  • Cess to be exempted for production from blocks offered under NELP.
  • Companies to be exempted from payments of import duty on goods imported for petroleum operations.
Source

PIB, Arthpedia
Posted by Jawwad Kazi on 19th Jul 2018
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