Critically evaluate the risk-sharing model (cost-sharing in drilling) adopted in offshore exploration schemes as a tool to attract private investment in high-capital sectors.

Q. Critically evaluate the risk-sharing model (cost-sharing in drilling) adopted in offshore exploration schemes as a tool to attract private investment in high-capital sectors. (15 marks, 250-350 words)

A single deepwater exploratory well costs USD 125–150 million with no guarantee of a discovery. The Samudra Manthan scheme (Central Sector, ₹84,084 crore up to FY 2030–31) therefore offers up to 50% of eligible drilling cost or ₹675 crore per well, whichever is lower [1]. Such cost-sharing is a powerful de-risking tool, but its success depends on design safeguards.

Merits as an instrument of investment mobilisation - Corrects market failure: exploration is a high-risk, lumpy investment where private capital under-invests; part-funding the dry-hole risk makes deepwater acreage bankable [1]. - Leverage effect: government pays at most half, so ₹43,200 crore for 60 deepwater/ultra-deepwater wells crowds in an equal or larger private share [1]. - Capped and conditional: the ₹675 crore ceiling limits fiscal exposure per well and preserves investor incentive to control cost [1]. - Ecosystem spillovers: paired with shared production/evacuation infrastructure and an Oil & Gas Manufacturing and Services Zone, it builds Make in India capability, not just wells [2]. - Strategic payoff: cuts exposure to crude price shocks, seen during recent West Asia disruptions that forced excise and export-levy interventions [3].

Limitations that temper the verdict - Moral hazard: subsidising input cost rewards drilling activity, not discovery; firms may drill low-prospectivity blocks. - Fiscal risk without upside sharing: the state absorbs losses while gains accrue largely to the operator unless royalty/profit-share claw-backs are tight. - Capability, not capital, may bind: rig availability, ultra-deepwater technology up to 3,000 m and skilled manpower are physical constraints money alone cannot relax [1]. - Execution risk: outcomes hinge on timely clearances, seismic data quality and evacuation infrastructure; Phase-I targets are ambitious against a modest discovery base.

On balance, cost-sharing is a sound risk-transfer, not a subsidy, provided it is paired with transparent data disclosure, performance-linked disbursal and claw-back on commercial success. Anchored to reserve accretion of over 600 MMTOE [1], it can convert energy vulnerability into self-reliance — a template extendable to other high-capital frontier sectors.

(~330 words)

Sources: 1. Cabinet approves 'Samudra Manthan' – National Offshore Exploration Scheme with an outlay of ₹84,084 crore (PIB, 31 July 2026) — outlay, 50%/₹675 crore per-well support cap, 60 deepwater wells and ₹43,200 crore, 3,000 m water depth, 600 MMTOE reserve target 2. Cabinet approves 'Samudra Manthan' (National Offshore Exploration Scheme) — PMIndia — Oil & Gas Manufacturing and Services Zone, evacuation infrastructure, Make in India linkage 3. Updates on Key Sectors in View of Developments in West Asia (PIB) — crude price volatility and government fiscal response