ECONOMY:

1) The Union government on 30 May 2012 announced the constitution of a committee under the
chairmanship of Prime Minister's Economic Advisory Councils (PMEAC) chairman C. Rangarajan to review the existing production sharing contracts (PSCs). The PSCs are to be reviewed in the backdrop of the recent spat between Reliance Industries Ltd. (RIL) and the Petroleum Ministry. The review followed the Comptroller and Auditor Generals (CAG) draft report that had asked the Petroleum Ministry to carry out a comprehensive review of the PSCs to protect the interests of the Government. The committee will look into the structure and elements of the guidelines for determining the basis or formula for the price of domestically produced gas, and for monitoring actual price fixation. Also the committee will have to explore various contract models with a view to minimise monitoring of expenditure of the contractor without compromising on the hydrocarbons output across time and on the government's take. Current PSCs, signed under the New Exploration Licensing Policy (NELP) of 1999 provide for private companies to recover all of their capital and operating expenditure from oil and gas revenues after which the profits are shared with the government as per a specific formula. However, this model was severely criticized when RIL recovered most of its investment from revenues earned from sale of natural gas even as output fell short of the targets in RILs eastern offshore KG-D6 fields. It is to carry out a review of the existing PSCs, including in respect of the current profit-sharing mechanism with the pre-tax investment multiple (PTIM), as the base parameter. The committee is to submit its recommendations by 31 August 2012.

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