This paper presents preliminary results from an analysis of the fiscal system for oil and gas exploration in Indiacovering the period from the liberalisation of the upstream sector to the present. It begins by summarisingliterature on resource taxation and the trade-offs in fiscal design, followed by a description of the Indianregime. It then outlines the method, a meta-modelling approach which combines cash flow simulations frommodel field data into a regression model to identify the impact of fiscal terms under the regime on economicmeasures representing returns to both firms and the government. Preliminary results suggest that out of a set ofseven parameters (representing the fiscal terms as independent variables), the share of profits to thegovernment (particularly at the upper tranche of India’s ‘R Factor’ system), the oil price, and the discount ratesused, account for the most influence on the system functionals (economic measures or dependent variables). Thepaper explores some implications of a proposed policy reform, changing the system from the R Factor model toa simplified revenue sharing model. Specifically, preliminary results imply that royalties and corporate incometax, both primary features of the proposed new model, are unlikely to influence broader government objectivesin fiscal design unless elements of the R Factor model are incorporated into it via equivalent fiscal instruments.
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