New Oil Royalties Mooted

The ministry for petroleum and natural gas has worked out revised royalty rates for Central and state governments under the New Exploration Licensing Policy (NELP). Three rates on crude oil _ one each for onshore, offshore and deepwater oilfields _ will replace the present single rate of royalty.

The new rates are: 12.5 per cent of the sale price of crude oil for onshore fields, 10 per cent for offshore fields and five per cent for deepwater oilfields. The current system allows for a fixed royalty of Rs 575 a tonne.

The ministry has prepared a draft Bill to amend the Oilfields (regulation and development) Act, 1948 for the purpose. The Bill is being vetted by the law ministry and will be sent to the Cabinet before being presented in Parliament.

As per the 1948 Act, the rate of royalty paid by producers is revised every three years. The royalty from offshore fields goes to the Centre and the royalty from onshore fields to the government of the state in which the field is located. The entire cess amount, however, goes to the Centre.

While announcing the NELP, the government had made it clear that a new tax code for the blocks would be offered.

Some of the tax reliefs under the NELP have already been announced. But the royalty issue had not been resolved pending objections from some state governments.

It is learnt that these objections, basically stemming from the fear of getting lesser royalty under the new scheme, have now been resolved.

The petroleum ministry has worked out the three new rates in consultation with state government officials.

There is no provision in the 1948 Act for more than one rate, which has to be revised every three years. This has necessitated the amendment of the Act.

The government's task has been eased by the fact that the two major oil-producing states of Maharashtra and Gujarat are controlled by the BJP at present.