Centre backs Assam's claim on crude royalty

The Centre today came out in support of the Assam government seeking royalty on crude from PSU firms, including ONGC and OIL, at a pre-discounted rate in line with a Supreme Court order.
"Assam's expectation is right. The previous government at the Centre did injustice to Assam and Gujarat by allowing to pay low royalty. Gujarat went to the Supreme Court and got a verdict in its favour," Petroleum and Natural Gas Minister Dharmendra Pradhan told reporters here.
He said the demand of the north-eastern state is "genuine" and the central government "will see how it can help" in this matter.

"Today, I met the Chief Minister (of Assam) and we discussed the issue. I will definitely take up this matter," Pradhan said.
The Ministry of Petroleum and Natural Gas has been allowing ONGC and OIL to supply crude to oil marketing companies at highly discounted rates and has asked the producers to pay royalty to the states on the basis of such subsidised prices.
The Assam government had already approached the Gauhati High Court seeking a direction to ONGC and OIL to pay royalty on crude at a pre-discounted rate to the state.

The Supreme Court, in its interim order, had directed ONGC to pay oil royalty to Gujarat at pre-discounted crude price beginning from February 1, 2014.

Earlier, the Gujarat High Court in a petition filed by the Gujarat government held that the royalty should be payable to the state at market price of crude oil and not post- discount price.
The Assam government claims that the amount of discount has at times been as high as 90 per cent or more and this has handed the state a cumulative loss of revenue of more than Rs 10,000 crore since 2008-09.
The state government has been demanding that Assam gets its share of royalty on crude and VAT as well as other taxes at actual market price and not on the basis of heavily discounted sale price as is the case of Gujarat.

Upstream companies like ONGC and OIL are liable to pay royalty to the states on production of crude oil at 20 per cent on well head price, subject to certain deductions.
Besides, such firms are also liable to pay VAT at 5 per cent on sale of oil.