The NELP, announced in the last Budget, has been hanging fire for lack of inter-ministerial consensus on the amendments necessary in the Income Tax Act, for a new tax code for oil exploration and production (E & P) companies. Also awaiting amendments are the Oilfields (Regulation and Development) Act and a notification for exemption of cess. By November last year, draft Bills for amending the Income Tax Act, the Oilfields Act and the notification on cess exemption for NELP were in different stages of readiness.

The outgoing United Front government even prepared an ordinance on the NELP, when fresh elections were declared and the Union Parliament was dissolved. A broad thinking within government now is that, instead of introducing a separate Bill to amend theIncome Tax Act, the amendment could be effected in the Finance Bill. The notification on cess could also be rectified simultaneously, to allow an exemption for oil companies eligible for the NELP.

The Oilfields Act, that imposes a royalty equal to 20 per cent of the value of oil production, has to be amended to allow the vastly more attractive royalty rates available in the liberalised exploration and licensing policy. Bidders for the 47 oil blocks that will be offered through an open acreage bidding once the NELP takes off, will only have to pay 12.5 per cent royalty ad valorem for on-land areas.

The royalty rate will be further pared down to 10 per cent for the more capital-intensive offshore oil production. Exploration in deep waters will entail an added incentive of five per cent royalty on production.

To entice private sector investment, the NELP offers a five-year tax holiday for the first seven, and most lucrative, years of crude oil production. The thrust of the BJP-led coalition at the Centre,on energy projects rules out the ardous drill of introducing multiple Bills to make NELP effective. The Central Electricity Regulatory Commission (CERC) was recently given life through an ordinance, perhaps to reassure investors in power projects of the Centre's sincerity in making power tariff structures more remunerative.

Think tanks within government say an ordinance for the NELP was not necessary, since prospective investors were unlikely to be in a hurry to rush into the high-risk business of oil exploration.

Multinationals known to be awaiting the NELP like Shell International and Mobil, confirmed to The Financial Express that they were willing to wait and see what shape the new policy ultimately took. ``We would first of all do a study,'' said Derek J Corbishley, chief executive of Shell India Production and Development -- the Netherlands-based parent of which, has the largest reserves of oil and gas in the world.

Shell India is keen on jointly exploring offshore and deep water blocks with theOil and Natural Gas Corporation (ONGC) once the NELP gains legal sanction, but not before it has done some independent assessment of the blocks on offer. Information dockets on the 47 oil blocks have been readied by the Director General of Hydrocarbons, of which 28 offshore blocks are expected to be offered for bids first.

Mobil Eastern Exploration and Development vice-president Steven D. Hall admitted that the multinational was ``waiting for the NELP, ``But indicated that Mobil probably does not mind waiting a wee bit longer. We have a finite budget for exploration opportunities,'' Hall said to emphasise the caution with which potential investments are selected, adding ``we try to focus on areas where the scale (of operation) is significant.''

Fiscal Sops In NELP