Sharing oil profits

The Finance Minister, P. Chidambaram’s statement that the Government would review its oil and gas exploration policy in order to move from the existing ‘profit-sharing’ to a ‘revenue-sharing’ model of awarding contracts for blocks, is welcome and timely. The pitfalls of the current regime – where firms bid on the basis of paying the Government a share in profits after deducting expenses incurred in exploration, field development and production from their revenues – are well known today.

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