Govt to fill royalty gap of crude producing states
The Centre on Wednesday decided to pay from the budget the difference between royalty paid to states by explorers on oil pumped from old fields and the present rate for new fields. Operators of some 28 fields in Gujarat, Assam and Arunachal Pradesh pay royalty at the capped rate in their production sharing contract dating back to the 1990s.
These contracts capped the royalty at Rs 450 per tonne, while the current rate is 12.5% of the price of oil. The difference was made up with Oil Industry Development Board (OIDB) funds. The Cabinet Committee on Economic Affairs has now decided that this differential will be paid by the Centre from budgetary allocations.
The outgo for the current fiscal is estimated to be Rs 56 crore. The contracts for the 28 fields covered under this decision were awarded to various companies during 1994-95, 2001 and 2004, an official release said.
The decision will reduce OIDB outgo and cover fields in Gujarat, Assam, Arunachal Pradesh, Assam and Gujarat. The royalty differential to be paid to Arunachal Pradesh will be Rs 30 crore and to Gujarat Rs 26 crore, assuming average crude price of $50 per barrel and foreign exchange rate of Rs 60 to a dollar.
At present, state governments get royalty based on the Oilfields (Regulation & Development) Act, 1948 and Petroleum & Natural Gas Rules, 1959 and the differential royalty (difference between the royalty rates as per PSC and the notified rate of royalty on crude oil production) is paid by OIDB.
“The standing committee on petroleum and natural gas, while examining the functioning of OIDB, recommended that differential royalty to the concerned state government may be made through budgetary allocation, in order to ensure proper utilization of OIDB funds,” a statement said. OIDB funds are supposed to be utilized for financing development activities of the sector.