Vikramji, hope this helps.

The oil & gas block in India are now awarded to the bidders under the New Exploration & Licensing Policy ( NELP). under which the national oil companies and private players are treated at par and are required to compete with each other for acquiring exploration acreages under uniform contractual and fiscal framework

The policy lays down no minimum expenditure on exploration, no signature, discovery or production bonuses and no compulsory state participation. Moreover, it provides a seven-year tax holiday from the date of commencement of commercial production, zero c ustoms duty on imports required for petroleum operations and other attractive terms. It also promises 100 per cent cost recovery on exploration, production and development. More crucially, it offers full recovery of all royalties paid to the Indian gove rnment for the oil or gas extracted. The policy also offers the option of a 10-year amortisation of all exploration and drilling expenses. The successful bidder who hits black gold can sell it in the domestic market not at international prices, but at import parity prices that include not only the cost of the oil or gas, but also the transportation cost right up to the nearest port. An exploration licence or a mining lease acquired by the successful bidder can be assigned with the approval of the Govern ment of India.

The fiscal package will be evaluated on the basis of the percentage of profits that the bidder offers to share with the Government of India after all the costs have been fully met. The model production-sharing contract (MPSC) envisages varying rates of p rofit-sharing to be offered by the bidder depending upon the pre-tax investment multiple achieved by the bidder. (The investment multiple is the net investment made by the successful bidder after all the exploration, production and development expenses have been recovered and the royalties paid.) The profit-sharing rates are biddable. The three biddable parameters in the offer are: 1. work programme commitment, 2. profit-petroleum share expected by the contractor at various levels of pre-tax multiple of investments reached and 3. percentage of annual production expected to be allocated to cost recovery.

The bids will be evaluated on the basis of weightage to the extent of 6 per cent for technical capability of the bidder, 4 per cent for financial strength of the bidding consortium, 60 per cent for "committed work programme" and 30 per cent for the fiscal package offered

Bidders enter in to a production sharing contract ( PSCs) with the Government of India

All companies are required to pay royalty at the rate of 12.5 per cent on crude oil to the state governments for on-land areas and at 10 per cent to central government for shallow water areas. Royalty is payable at half the rate i.e., at 5 per cent, to the central government for deep water areas for the initial seven years of commercial production. Half the royalty from off-shore areas is credited to a hydrocarbon development fund to promote and fund exploration related activities.Under NELP, government has exempted companies from payment of cess on crude oil.