Role of State in Market Capitalism

Presented by :

Abhishek,Deepa,Jagmohan
Neha,Nithika,Suman,Swathi
 GOI started a New Exploration Licensing Policy
(NELP) in 1999
 Monopoly of ONGC was ended
 Private & Foreign Players were allowed in the
business
 RIL & NIKO emerge successful bidder of KG D6
 Apr 12, ’04: Production sharing contract (PSC) executed among Govt, RIL and NIKO

 June 18, ’05: MoU signed between RIL promoters family members. Anil Ambani
resigns as RIL JMD. Re-organization of business begins

 Dec 9, ’05: HC approves the RIL demerger scheme. Gas, coal, telecom and financial
services businesses go to Anil and Mukesh retains others

 Nov 8, ’06: RNRL, owned by Anil Ambani files company application taking dispute
with RIL over gas supply to court

 May 3, ’07: Company judge restrains RIL from creating third party rights in gas meant
for RNRL

 Oct 10, ’07: Govt. approves market price determined by RIL at above $4.20 mmBtu
 Oct 15, ’07: Company Judge upholds RNRL’s case, says MOU between parties binding.
Directs them to renegotiate GSMA instead of directing a modification of the Scheme

 Dec ’07: RIL and RNRL file separate appeals against Oct 15 judgment. RNRL said court
did not give directions for amendment of gas supply agreement in order to make the
scheme workable. Interim order against RIL continues

 Jan 30, ’09: Mumbai HC concludes hearing. Passes Interim order lifting stay on sale of
gas from KGD6

 June 15, ’09: HC asks both sides to honour 2005 MoU and arrive at a fresh ‘bankable
agreement’ within a month to ensure RNRL gets 28 mmscmd gas from RIL, but till then
continues Jan 30 interim order
 As per PSC, Government to get 5% as royalty
from the revenue at KG Basin for 7 years

 Royalty
 “A portion of the proceeds paid to the owner of a
right, for the use of it. It is usually a percentage on the
retail price of the each unit sold”
 “An economic system in which the means of
production and distribution are privately or
corporately owned and development is
proportionate to the accumulation and
reinvestment of profits gained in a free market”

 Oil & Natural Gas was brought under the same

category in 1999
 Government Intervention is justified due to following reasons
 RIL is merely a contractor for the KG Basin block (D-6) and not the owner.
Therefore, RIL has limited rights to exploration & selling
 Oil & Gas is a national resource & the government has full right to
intervene in the pricing, selling & extent to which it can be utilized. The
EGoM has the right to intervene
 
 As per PSC, GOI is to get 5% royalty on the selling price. If RIL decides to
under-price & sell, the government loses its revenues. The government had
fixed a rate of $4.2 per (mmBtu) for  natural gas in its gas utilisation policy,
which takes the royalty amount at around Rs 15,000 crore.  If RIL sells gas
to RNRL and NTPC at the rate of $2.34/unit, the government will get about
Rs 3,500-4,000 crore less as royalty.
All criticism & accolades are welcome,we available at
iipmsectiona@gmail.com