Lok Sabha Question No. 2503 (UNSTARRED), answered on 2015-12-14
Subject: Royalty and Cess on Crude Oil/Gas
Ministry: PETROLEUM AND NATURAL GAS
Asked by: ANIL SHIROLE

## LOK SABHA UNSTARRED QUESTION NO. 2503 TO BE ANSWERED ON  14.12.2015 ROYALTY AND CESS ON CRUDE OIL/GAS

## 2503. SHRI ANIL SHIROLE:

## पेट्रोलियम एवं प्राक ृ तिक गैस मंत्री

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

- (a)    the  details  of  revenue  earned  by  the  Government  on  account  of  royalty  and  cess  on production  of  crude  oil  and  natural  gas  during  the  last  three  years  and  the  current  year, State/Company-wise;
- (b)    whether  the  upstream,  companies  including  Oil  and  Natural  Gas  Corporation  Limited (ONGC) unilaterally pays the royalty to the States on post-discounted prices;
- (c)  if so, the details thereof along with the reasons therefor, State/UT/Company-wise;
- (d)    whether  the  rates  of  royalty  being  paid  to  the  States  are  based  on  the  Wellhead  price  on crude oil production and if so, the details thereof;
- (e)  whether certain States including Gujarat have represented to the Government for payment of royalty as per pre-discounted prices; and
- (f)    if  so,  the  details  thereof  alongwith  follow-up  action  taken  by  the  Government  and  the outcome thereof?

## ANSWER

## पेट्रोलियम एवं प्राक ृ तिक गैस मंत्रािय में राज्य मंत्री ( स्विंत्र प्रभार )

## ( श्री धमेन्द्र प्रधान )

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

(a):    The  details  of  royalty  paid  on  crude  oil/natural  gas  produced  by  Oil  and  Natural  Gas Corporation Limited(ONGC), Oil India Limited(OIL) and Private/Joint Venture Companies to the  State  Governments  during  the  last  three  years  as  well  as  cess  payment  on  crude  oil production to the Central Government are given at Annexure-I.

(b) and (c):  In view of Government of India's directives, vide letter dated 30 th October, 2003, since 2003-04, ONGC has been allowing discount to Oil Marketing Companies (OMCs) on sale of crude oil.  In the above letter, ONGC was directed that the revenues of State Governments in terms of royalty on crude oil should not be affected by the discount. In view of specific directive, since April. 2003, ONGC has paid royalty on production of onshore crude to State Governments on pre-discount sale price though royalty on production of offshore crude oil to the Government of India was paid at post-discount sale price, in line with statutory provisions.

Subsequently, Ministry of Petroleum & Natural Gas vide letter No.P-20012/28/97-pp(Part-II-A) dated 23 May, 2008, withdrew the earlier directives issued vide letter dated 30 th October, 2003. Consequently, ONGC and OIL have been making payment of royalty to State Governments on post discount price from 01 st April, 2008.

(d):  Royalty on crude oil to the Central and State Government is paid at the rates specified in the Schedule to The Oilfields (Regulation and Development) Act, 1948 on the well head price.  The current rate of royalty is given at Annexure-II.

(e) and (f):  The State Governments of Gujarat and Assam have represented to the Government of  India    on  the  issue  of  payment  of  royalty.    After  examination,  Government  of  Gujarat  was informed  on  07.07.2009  that,  in  respect  of  offshore  crude  oil,  the  Royalty  paid  by  upstream companies  to  the  Central  Government  has  always  been  on  the  basis  of  post-discount  prices. There  is  nothing  in  the  legal  provisions  to  suggest  that  payment  of  onshore  Royalty  to  State Governments should be on a different principle.

Government  of  Gujarat  had  filed  a  Special  Civil  Application  in  the  High  Court  of  Gujarat, Ahmedabad for payment of royalty at pre-discount prices. Hon'ble Gujarat High Court, vide its order dated 30 th November, 2013  decided that royalty on crude oil is to be paid on pre-discount price  and  directed  ONGC to make the payment towards shortfall royalty for the period April, 2008 till date, within a period of two months from the date of issue of order.

Aggrieved by the order, ONGC filed a Special Leave Petition(SLP) before the Supreme Court of India.    The  Supreme  Court  heard  the  matter  on  13 th February,  2014  and  granted  leave  in  the matter.    Pending  further  orders,  the  Hon'ble  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.  In compliance of court order, ONGC has started paying royalty to Govt. of Gujarat on pre-discount price w.e.f. February, 2014.

********

## ANNEXURE OF UNSTARRED QUESTION NO. 2503 DATED 14.12.2015

## Annexure-I Royalty payment  by ONGC (Rs. crore)

|                |   2012-13 |   2013-14 |   2014-15 |
|----------------|-----------|-----------|-----------|
| Assam          |    410.02 |    479.56 |    309.66 |
| Andhra Pradesh |    100.68 |    100.61 |    283.6  |
| Gujarat        |    975.65 |    336.9  |   2526.48 |
| Jharkhand      |      0.21 |      0.41 |      0.25 |
| Rajasthan      |   5082.62 |   6037.49 |   4528.53 |
| Tamil Nadu     |    261.03 |    291.93 |    294.16 |
| Tripura        |     39.7  |     50.18 |     72.37 |
| Total          |   6869.91 |   7297.08 |   8015.05 |

Royalty payment  by OIL (Rs. crore)

|                   |   2012-13 |   2013-14 |   2014-15 |
|-------------------|-----------|-----------|-----------|
| Assam             |   1316.48 |   1259.85 |   1267.73 |
| Arunachal Pradesh |      9.45 |      8.98 |      2.33 |
| Rajasthan         |      6.62 |      7.65 |      8.07 |
| Total             |   1332.55 |   1276.48 |   1278.13 |

Royalty payment  by Pvt/JV  companies (Rs. crore)

|                   |   2012-13 |   2013-14 |   2014-15 |
|-------------------|-----------|-----------|-----------|
| Arunachal Pradesh |     64.49 |     63.62 |     42.27 |
| Gujarat           |     88.04 |     81.63 |     73.23 |
| Rajasthan         |   5078.03 |   6037.44 |   4519.12 |
| Total             |   5230.56 |   6182.69 |   4634.62 |

## Cess payment by ONGC, OIL and Pvt/JV companies (Rs crore)

|                  |   2012-13 |   2013-14 |   2014-15 |
|------------------|-----------|-----------|-----------|
| ONGC             |   9999.27 |   9974.02 |  10255    |
| OIL              |   1711.3  |   1602.77 |   1531.36 |
| Pvt/JV companies |   4181.69 |   4495.23 |   4362.45 |
| Total            |  15892.3  |  16072    |  16148.9  |

Note: State-wise royalty compilation is made on annual basis.

## Schedule of Royalty rates on crude oil production and natural gas production

## A)  Crude Oil/ Casing Head Condensate Production:

|               | Nomination/Pre NELP PSCs                                                       | NELP PSCs                                                                     | Discovered fields PSC                                                                                                                                                     |
|---------------|--------------------------------------------------------------------------------|-------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| On-land       | 20% of well head price on cum- royalty basis                                   | 12.5% of well head price on ex-royalty basis                                  | The rates of royalty were Rs. 481 per MT for first round and Rs. 528 per MT for second round respectively in the discovered fields as guaranteed under the PSCs. However, |
| Shallow Water | 10% of well head price on cum- royalty basis.                                  | 10% of well head price on ex-royalty basis                                    | The rates of royalty were Rs. 481 per MT for first round and Rs. 528 per MT for second round respectively in the discovered fields as guaranteed under the PSCs. However, |
| Deepwater     | 5% of well head price for 1 st 7 years and 10% thereafter on cum-royalty basis | 5% of well head price for 1 st 7 years and 10% thereafter on ex-royalty basis | State Governments are royalty based on ORDA P&NG Rules and the additional royalty (difference between rates as per PSC and                                                |

- B) Natural gas production are 10% of well head value for onland and shallow water areas applicable  uniformly  for  all  regimes  i.e.  nomination,  pre-NELP,  discovered  fields  and NELP regimes. In deepwater areas under NELP, royalty of 5% of well head price for first 7 years and 10% thereafter on ex-royalty basis is applicable.

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