Government earned 'windfall' profits on soaring crude prices

High crude oil prices in 2008 have left the government richer by a few thousand crore rupees. In 2008-09, the government earned “windfall profits” from the petroleum sector as crude oil prices spiked, touching a high of $147 in July 2008.

The revised estimate (RE) for the current financial year is 39 per cent higher than the Budget estimate (BE). This is on account of higher income from profit petroleum (as crude oil prices soared), royalty and licence fee. Profit petroleum is the government’s share of profit from an oilfield.

“The increase is on account of the rise in crude oil prices. The Budget estimates were low as we had then assumed the average crude oil price at $50 per barrel,” said a senior government official.
 

HUGE GAINS (in Rs crore)
Till Dec 2008	BE '08-09	RE '08-09	BE '09-10
Profit Petroleum	2,760	5,079	2,071
Royalty	3,267	4,251	5,175
Licence fee	65	68	63
Source: Receipts Budget 2009-10

Against the Budget estimate of Rs 6,777.04 crore, the revised estimates in the Budget document have been put at Rs 9,423.23 crore — an increase of Rs 2,646.19 crore or 39 per cent.

Till December 2008, the government’s income from profit petroleum stood at Rs 5,079 crore against the estimate of Rs 2,760 crore. The government earned around Rs 4,251 crore in royalty against an earlier estimate of Rs 3,267 crore.

The licence fee contributed around Rs 68 crore to the government’s kitty against the estimate of Rs 65 crore.

The highest contributor is Cairn India-operated Ravva oil and gas field off the Andhra coast. Till December 2008, its contribution in the form of profit petroleum was Rs 3,336.93 crore against an earlier estimate of Rs 1,973 crore.

Panna-Mukta fields fetched around Rs 472 crore, against the estimated Rs 155 crore. The Tapti field contributed Rs 761.71 crore against the earlier estimate of Rs 348 crore.

While experts say that the government estimates for 2009-10 could fall substantially as crude oil prices have fallen to around $50 per barrel, senior official from the Ministry of Petroleum and Natural Gas say the fall might not be much as Reliance Industries’ Krishna-Godavari (KG) D6 block will begin gas production this year.