India raising royalty rates on crude oil

The Minister for Petroleum & Natural Gas, Shri Ram Naik has decided to raise the ad-hoc rate of royalty from Rs. 578/- per metric tonne (MT) to Rs. 750/- per MT with effect from June, 1999. This will be subject to a limit of 20 % of the well-head value of the crude oil. The decision is expected to enhance the royalty receipts of all oil producing States in the country including Gujarat, Assam, Andhra Pradesh, Tamil Nadu, Arunachal Pradesh and also of Central Government.
Various States had been pressing for upward revision of the rates of royalty payment as the crude oil prices in the international market rose sharply in the recent past and because of application of import parity concept, oil producers have been getting much higher value for their crude than before. The Minister has also directed that steps on priority basis be taken to evolve a new scheme of royalty within six months in consultation with all concerned including State governments, in view of the decision to gradually dismantle APM and the substitution of cost plus pricing by import parity.
To enable payment to oil companies at international market rates for the crude oil produced in the country, the full import parity has been scheduled to be achieved by 01.04.2002, starting from 75 % in the first year to 82.5 % in the last year of transition period (01.04.1998 to 31.3.2002). In the current year, 1999-2000, crude oil producers are being paid at the rate of 77.5 % of weighted average price of imported crude oils in the country.
Within the first month of taking over of Shri Ram Naik as Petroleum Minister, another royalty related issue concerning State Governments has also been resolved. This relates to the State Governments, including Govt. of Gujarat, who had been representing for last several months against the delay in fixation of royalty rate on crude oil for the period 1993-98.
Rates of royalty for the period 1993-96 have since been revised in accordance with the Govt. Scheme evolved in consultation with State Governments. Accordingly, the earlier provisional royalty rate of Rs.528/- per MT has been substituted by a new rate of royalty of Rs.539.80 per MT. Arrears to the tune of Rs.21.32 crore have accordingly been released to Gujarat Government by ONGC, in November, 1999.
Assam has also been paid Rs.17.00 crore approximately as arrears of royalty on crude oil. Other beneficiary States are Tamil Nadu and Andhra Pradesh who have received Rs.1.32 crore and Rs.0.13 crore respectively.