Govt's profit from Barmer field to fall by Rs 5,032 cr

The government’s revenue from Cairn India’s Rajasthan oilfields will fall by Rs 5,032 crore if royalty payments are made cost-recoverable.

“As per projections made on the basis of assumption on production, crude oil price, exchange rate etc, in net present value (NPV) terms, the government’s share of profit petroleum is reduced by Rs 5,032 crore, that of Cairn India by Rs 6,272 crore and ONGC by Rs 2,688 crore over the life of the project, that is till 2020,” Minister of State for Petroleum and Natural Gas R P N Singh said in a written reply to a question in the Lok Sabha here on Thursday.

“However, in this situation, ONGC would recover the cost of royalty paid by them to the state government on behalf of themselves, and Cairn, amounting to Rs 13,995 crore in NPV terms, over the life of the project,” he said.

At present, Cairn India does not pay any royalty on its 70 per cent interest in its mainstay Rajasthan oilfields. ONGC, which has a 30 per cent share in Barmer output, pays full royalty.

While ONGC, as a licensee, was obliged to bear the full royalty burden, the accounting procedure in the production-sharing contract said the royalty paid by ONGC was cost-recoverable from the common pool of revenue before profit petroleum was calculated. The issue surfaced after Cairn Energy announced offloading a majority stake in Cairn India to Vedanta Resources.

ONGC insisted that the royalty should be treated as cost-recoverable. In line with ONGC’s suggestion, the government has given conditional clearance to the deal, but has decided that the royalty will be treated as cost-recoverable. Cairn Energy, the promoter of Cairn India, has accepted the government’s riders and Cairn India has also sought shareholders’ approval through postal ballot.