How do protracted contractual disputes under the PSC regime affect investment in India's upstream hydrocarbon sector? Suggest reforms.

Under a Production Sharing Contract (PSC), the operator first recovers its costs. Only after that does the government take its share of "profit petroleum". This makes cost accounting a permanent source of disputes. The Ravva field dispute in the Krishna-Godavari basin was referred to arbitration in 2004 and was still in court in 2026 [1]. It shows how such disputes can outlast the investment cycle and discourage the capital the sector needs.

Impact on upstream investment

• Regulatory-risk premium: The Ravva "carry" dispute, worth about $99 mn, ran from the first award (2004) through the final award (2016). It ended only when the Supreme Court dismissed the Centre's appeal in 2026, about 22 years in all [1]. Investors price such delays into their bids or stay away.
• Appeals by default: The Centre had already lost a separate Ravva cost-recovery challenge in the Supreme Court in 2020 [2]. This suggests it appeals out of habit, not on legal merit.
• Futile resistance: Under Section 48, Indian courts can refuse to enforce a foreign award only on narrow grounds, and they cannot re-examine the merits [3]. Resisting an award therefore mostly adds cost and gains little.
• Credibility deficit: The Supreme Court warned the Centre that "Nobody will trust you" [1]. This undercuts India's ambition to become an arbitration hub.
• Reciprocity risk: The New York Convention works on mutual enforcement [4]. If India stalls foreign awards, Indian firms will find it harder to enforce their own awards abroad.
• Design flaw: When the government moved to HELP, it acknowledged that the cost-recovery model caused delays and disputes [5].

Reforms

• Cleaner contracts: Extend HELP's revenue-sharing model, which removes cost scrutiny [5]. Allow legacy PSCs to migrate to it on negotiated terms.
• Filter appeals: A senior committee should record in writing whether an appeal has a real legal basis. A good-faith decision not to appeal should be protected from later vigilance action.
• Settlement window: Vivad se Vishwas II (2023) offered a one-time settlement of government contract disputes [6]. A similar window should cover legacy PSC disputes and foreign-seated awards.
• Institutional arbitration: A Parliamentary Standing Committee found that PSUs ignore institutional arbitration when drafting contracts. It recommended making the IIAC the designated forum [7].
• Respect finality: Once the seat court upholds an award, the government should comply instead of fighting enforcement.

Long PSC disputes turn a flaw in contract design into a loss of sovereign credibility. Simpler revenue-sharing contracts, disciplined litigation and quick settlement would uphold the sanctity of contract and the rule of law. They would also attract the investment India needs for energy security and SDG 7.