In a move aimed at boosting government revenues and profits of oil producers, the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi on Wednesday has approved the deregulation of the sale of domestically produced crude oil.
To date, the allocation and pricing of oil produced by ONGC and Oil India were decided by the government. The new policy comes into effect on October 1, 2022. Even private oil producers will benefit from the change in policy.
The Petroleum Planning and Analysis Cell of the petroleum ministry had also recommended deregulation of the sale of domestically produced crude. The government had also proposed the measure in 2021 but the move was not approved by the cabinet at that time.
"This will ensure marketing freedom for all Exploration and Production (E&P) operators. The condition in the Production Sharing Contracts (PSCs) to sell crude oil to the government or its nominee or government companies shall accordingly be waived off. All E&P companies will now be free to sell crude oil from their fields in the domestic market," said information and broadcasting minister Anurag Thakur.
The government revenues like royalty and cess will continue to be calculated on a uniform basis across all contracts. However, exports of domestically produced crude will not be permissible.
The move will help the government in shoring up higher revenues in the form of royalty and cess, as oil producers will be able to sell at market prices.
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"Deregulation will help increase domestic exploration, production, and refining capacities and help cut down fuel imports in the long run," Thakur said.
RS Sharma former CMD ONGC, said, "This is a welcome step. ONGC had been asking for deregulation for a long time. More than government-owned oil producers, private companies had been strongly lobbying for freedom to sell and decide prices."