Government panel flays PSC with Reliance for KG-D6 block

A high-level committee headed by retired finance secretary Ashok Chawla has criticised the system of production sharing contracts like the one the government signed with Reliance Industries for the gas-rich KG-D6 block, saying these contracts are designed to benefit private players at the government's expense.

Chawla, who retired as finance secretary on 31 January was heading a committee on allocation, pricing and utilisation of natural resources.

The ministry of petroleum and natural gas has, however,  tried to pass on the buck saying the New Exploration Licensing Policy under which Reliance bagged exploration and production rights for the KG-D6 block was designed by the BJP-led government in 1999 and the terms were signed by the then NDA government led by Atal Bihari Vajpayee.

The production sharing contract (PSC) for the KG-DWN-98/3 block, which Reliance won in the first round of NELP, was signed in 2000.

"The Congress-led UPA government first came into power in May, 2004. You don't expect contracts signed by sovereign governments to be reneged just because a different party has come into power," an official said.

The PSCs provide for the operator to recover all capital while the government is made to share 85 per cent of the operating expenditure from its share of profit in a field