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Forum Name :
Should the new owners of Ratna field pay cess/royalty at current rate?
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Can you fault ONGC for playing truant?
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16 Nov 2005 09:13 AM
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There is a feeling among industry circles that the policy of hiving off ONGC fields to private and foreign operators through the joint venture route in the mid-Nineties was unfair to the public sector major. From the current perspective, these fields went literally for a song and both private and foreign operators made large profits out of their investments. There are those who argue that while ONGC did the hard work in terms of discovering the fields, others ended up reaping the benefits. The CAG had passed strictures against the auctioning process and the CBI was roped in to conduct an investigation on whether bribes were paid and crude reserve details deliberately suppressed in order to keep valuations down. But there is the other side of the picture as well. There are those who argue that there would always be a speculative element in all investments in the exploration and production side of the hydrocarbon chain. Small investments could bring a huge windfall whereas large investments can result in zero return if no hydrocarbon prospects were discovered. In this context, the argument goes, the valuations for joint venture fields were based on available data at that time. It was another matter that more reserves were discovered later (there would be some who would argue that the risks were minimal because they were not new but discovered fields). What is more, the Supreme Court had dismissed allegations of wrong doing in the award of the fields. The controversy had been a subject of much debate in the past but the issue was brought back to focus again in the face of ONGC's position on payment of cess and royalties for the Ratna-R series field. Ten years have passed since the field was put up for auction but a PSC is yet to be signed. ONGC had wanted the field reverted back but it was told that contracts were contracts and the law of the land had to be obeyed. It is possible that ONGC may have stepped out of the line by agreeing to pay current royalty and cess rates for the field. But can the public sector major be faulted for playing truant?
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