India’s production enhancement contract (PEC) model has come under sharp scrutiny after Deep Industries Limited (DIL) achieved faster-than-expected gains in its engagement with Oil and Natural Gas Corporation (ONGC).

In April 2025, ONGC handed over its mature Rajahmundry field in Andhra Pradesh to DIL under a 15-year Production Enhancement Contract. The structure was intended to balance risk and reward: DIL would receive a fixed monthly payment for maintaining baseline production and a 64% revenue share on incremental output achieved above the baseline.

Barely four months into operations, by August 2025, DIL had already exceeded the baseline production level. According to CareEdge Ratings, “DIL commenced the operation at the said field in Q1FY26 and has surpassed the baseline production in the month of August 2025.”

A windfall—or proof of efficiency?

The early success has triggered debate. Critics argue ONGC may have set the baseline too low, inadvertently creating a quick windfall for the contractor. A contract meant to spread rewards across 15 years has, in effect, yielded immediate upside, raising concerns about whether ONGC is leaving too much value on the table.

Supporters, however, point to the result as evidence of PEC effectiveness. Deep Industries mobilized quickly, applied specialized expertise, and lifted production within months—achievements that ONGC itself had struggled to deliver in the mature asset. From this perspective, the upside is deserved, not accidental.

Implications for India’s PEC model

The Rajahmundry case has put PECs firmly in the spotlight. With ONGC and other state-owned explorers under pressure to maximize recovery from aging fields, PECs are seen as a pathway to infuse private efficiency into public assets. But the controversy highlights the fine balance between setting realistic baselines and ensuring contracts do not unintentionally hand contractors easy gains.

For now, what was framed as a risky long-term bet has already started paying off handsomely. Whether this becomes a case study in flawed structuring—or in private sector execution—is a debate that will shape the future of India’s oil and gas asset revival strategies.

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