Mar 20: A detailed freshly published report has illustrated clear instances of how bidders have "gamed" India's NELP programmes.
8The entire scheme was badly planned and therefore lead to sub-optimal production.
8What happened was that the first-price sealed bid auction processes were susceptible to the ‘winner’s curse’ – a situation where the winner of the auction discovers that it may have overpaid for a lease when the second-highest bid is revealed to be relatively low.
8The problem of this overbidding can also be indicative of ‘speculative bidding’ – bids made with the main intention of increasing the value of a portfolio, particularly during times of high international oil prices.
8The risk to a government with overbidding was that the winner sought a post facto renegotiation of terms.
8The liquidated damages that were introduced later were highly inadequate to control the menace because the damages sought were pegged very low, at a fraction of the total cost of drilling a well.
8It looks like some of the charges made by the CAG that revenues were lost due to poor ex facto enforcement of NELP rules are likely to stick.
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