In order to ease regulations, the Cabinet Committee on Economic Affairs (CCEA) on Wednesday decided to deregulate the domestic crude oil sector, allowing oil producers such as ONGC, Oil India and private players to sell it in the open market. The new policy comes into effect from October 1. To date, oil producers could sell as per govt allocation policy.
The meeting of the CCEA, chaired by Prime Minister Narendra Modi, took place on Wednesday through video conferencing.
The CCEA has approved the ‘Deregulation of Sale of Domestically Produced Crude Oil’. The government has decided to cease the allocation of crude oil with effect from January 1, 2022. 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 will accordingly be waived off.
All E&P companies will now be free to sell crude oil from their fields in the domestic market. Government revenues like royalty and cess will continue to be calculated on a uniform basis across all contracts. Exports of domestically produced crude will not be permissible.
India’s domestic crude oil production has been witnessing consistent fall since 2014-15, whereas the demand for crude oil has increased in the past few years. The country imports over 80 per cent of its crude oil requirements. In the financial year 2021-22, the country produced only 28.4 million tonnes (MT) of crude oil, which is the lowest in nearly three decades, since FY94, according to reports.
Ageing fields in the country is one of the major reasons for the decline in production of domestic crude oil. The output is being maintained by investing in technologies to boost the recovery rate. Meanwhile, India’s crude demand has soared over the years, with the outputs declining, thereby making the country rely more and more on imports.
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