Lok Sabha Question No. 39 (STARRED), answered on 2019-06-24
Subject: Royalty on Crude Oil and Gas
Ministry: PETROLEUM AND NATURAL GAS
Asked by: Vishnu Dayal Ram

## LOK SABHA

## STARRED QUESTION NO. 39 TO BE ANSWERED ON 24 th  June, 2019

## Royalty on Crude Oil and Gas

## *39.  SHRI VISHNU DAYAL RAM:

## पेट् र ोलियम एवं प्राक ृ लिक गैस मंत्री

## Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- (a) whether royalty is paid to the State Governments on crude oil and gas on the basis of wellhead prices of crude oil and if so, the details thereof;
- (b) whether the upstream companies including Oil and Natural Gas Corporation Limited are paying the royalty to the States on post-discounted prices;
- (c) If so, the details thereof;
- (d) Whether certain  State  Governments  have  represented  to  the  Union  Government for payment  of  royalty  according  to  the  established  mechanism  and  at  pre-discounted prices; and
- (e) If so, the details thereof along with the follow-up action taken by the Government and the outcome thereof?

## Answer पेट् र ोलियम एवं प्राक ृ लिक गैस मंत्रािय में मंत्री ( श्री धमेंद्र प्रधान )

## MINISTER IN THE MINISTRY OF PETROLEUM & NATURAL GAS (SHRI DHARMENDRA PRADHAN)

- (a) to (e):  A statement is laid on the Table of the House.

STATEMENT REFERRED TO IN REPLY TO PARTS (a) to (e) of the LOK SABHA STARRED  QUESTION  NO.*39  ASKED  BY  SHRI  VISHNU  DAYAL  RAM  TO  BE ANSWERED ON 24 TH  JUNE,  2019  REGARDING  'ROYALTY  ON  CRUDE  OIL  AND GAS'

(a)  to  (c) :    Royalty  on  production  of  crude  oil  and  gas  is  payable  to  the  State Governments on wellhead price for production from onshore fields in terms of statutory provisions  of  Oilfields  (Regulation  and  Development)  Act  1948(ORDA),  Petroleum  & Natural Gas (PNG) Rules 1959, Petroleum & Natural Gas (Amendment) Rules, 2003 read with notifications/resolutions  dated  17 th   March,  2003,  16 th   December,  2004,  20 th August, 2007 and 28 th  August, 2009 issued by the Government under the ORDA from time to time.

In  order  to  protect from  the  inflationary  impact  of  rising  international  oil  prices, the Government has been modulating the retail selling prices of Petrol (upto 25 th   June 2010), Diesel (upto 18 th  October, 2014) PDS Kerosene and subsidized domestic LPG. As  a  result,  the  Public  Sector  Oil  Marketing  Companies  (OMCs)  incurred  under recoveries on the sale of petroleum products.  In this background, the Government has evolved  a  'burden  sharing  mechanism'  since  2003-04  to  ensure  that  the  burden  of under-recoveries incurred by OMCs is shared by all the stakeholders.  The National Oil Companies,  Oil  Natural  Gas  Corporation  (ONGC)  and  Oil  India  Limited  (OIL)  also shared the burden by selling the crude oil at discounted price. However, it was provided that  the  discount  offered  by  upstream  oil  companies  would  not  affect  the  royalty payable to the State Governments. Upstream oil companies paid the royalty on prediscount  price  during  the  years  2003-04  to  2007-08.    However,  in  May  2008, Government withdrew the said provisions.  Accordingly, ONGC and OIL started making payment of royalty to State Governments at post discount price for the period 1.4.2008 to 31.01.2014.The burden sharing mechanism has since been discontinued. Presently, the royalty on crude oil & gas produced from nomination blocks is being paid by ONGC and OIL on well head price derived from actual sale price realized.

(d) & (e) :   Government of Gujarat had filed a Special Civil Application in the High Court of  Gujarat,  Ahmedabad  for  payment  of  royalty  at  pre-discount  prices.  Gujarat  High Court inter  alia  pronounced  that  royalty  on  crude  oil  is  to  be  paid  on  pre-discounted price. Aggrieved by the order, ONGC filed a Special Leave Petition before the Supreme Court. Supreme Court stayed the operation of the  impugned judgment subject to the condition that ONGC pays royalty to State of Gujarat on pre-discounted price of crude oil w.e.f. 1 st   February 2014 onwards. Subsequently Government of Assam also filed a writ  petition  before  the  High  Court  of  Guwahati  and  further  moved  to  the  Supreme Court.  All  the  stake  holders  reached  an  agreement  (dated  17.02.2017)  and  it  was decided  that  Government  of  India  will  pay  to  the  Government  of  Gujarat  (Rs.  8392 crore) and Assam (Rs. 6306 crore) for the dues of royalty for the period from April, 2008 to  January,  2014.  Supreme  Court  had  disposed  both  the  petitions  as  per  the  above agreement.  Till  31.05.2019,  Rs.  8205.26  crore  to  Government  of  Gujarat  and  Rs. 5532.87 crore to Government of Assam have been released on this account.

*****