NEW DELHI: Foreign direct investment (FDI) in the oil sector fell sharply to Rs 300 crore in the first six months of the current fiscal year from Rs 6,500 crore in 2014-15, oil minister Dharmendra Pradhan told Parliament. The minister did not cite the reason for the fall in foreign investments in the sector, but oil companies around the world have sharply cut expenditure on new projects as the price of oil has fallen 60 per cent in a year, which has sharply reduced their returns on investment.

Indian companies have also cut expenditure. Cairn India, a key private oil producer in the country, has cut its capital spending for 2015-16 by 75 per cent to $300 million. Similarly, staterun Oil and Natural Gas Corporation (ONGC) is likely to spend about 20 per cent lower than initially planned.

The current FDI policy for the oil sector allows 100 per cent automatic route for exploration and production, refining by the private companies, marketing of petroleum products, pipelines, storage and LNG re-gasification infrastructure.

Except oil giant BP, there is not much foreign investor presence in the upstream sector. And most foreign investors have been waiting for years for fresh auction of new blocks by the government that is likely to be further delayed due to lower price environment.

Shell and BG have an interest in the country's gas sector and liquefied natural gas (LNG) terminals.

The government recently announced a new exploration policy for smaller fields and plans to auction 69 of these sometime next year. The policy offers a major shift from the existing policy in fiscal terms offered to explorers. The government is also working on a new policy for major blocks.

Source : economictimes.indiatimes.com