ONGC, OIL may get tax sop in joint blocks
Oil majors ONGC and Oil India (OIL) may soon be relieved of the cess and royalty burden that they pay on behalf of their private sector partners in some of the jointly operated blocks.
By Rajeev Jayaswal & Soma Banerjee, TNN |
NEW DELHI: Oil majors ONGC and Oil India (OIL) may soon be relieved of the cess and royalty burden that they pay on behalf of their private sector partners in some of the jointly operated blocks. The PSU oil companies were required till now to pay up all such levies for blocks given on a nomination basis before the new exploration licensing policy.
These include levies paid on Panna Mukta Tapti blocks where ONGC pays up for its partners Reliance and British Gas or the Rajasthan blocks in Barmer where ONGC would have to pay on behalf of Cairn if the new norms do not kick in.
It is estimated that ONGC would have to cough up over $1bn in royalty and cess over the life of the Rajasthan fields where it farmed in after Cairn made a discovery. The amount would be more than ONGC’s 30% share in the oil production from the field.
The government may reimburse the statutory levies paid by national oil companies (NOCs) on behalf of their consortia partners of the pre-NELP era. The NELP regime started in 1991. Private parties involved in 17 production sharing contracts (PSCs) included Cairn Energy, Phoenix Overseas , Reliance Industries and Essar Oil.
The reimbursement will, however, be not made in cash. The amount will be adjusted against the profit petroleum payments being made by the two companies, sources said. The final nod of the Cabinet is expected soon. The government has received a significant amount from ONGC and IOC as statutory levies.
The reimbursement will, however, be restricted to the extent that the actual liabilities undertaken by the two PSUs on behalf of their private sector partners in the pre-NELP PSCs, a source in the government said.
According to an estimate, the government received Rs 14,603 crore royalty from offshore areas alone in the three financial years between ’03 and ’06. Similarly, total cess (from onshore and offshore areas) received by the public exchequer in the same period was worth Rs 16,119 crore. It is said that only a part of this amount is paid by OIL and ONGC as statutory levies on behalf of their consortia partners. During the same period, the government received Rs 7,962-crore profit petroleum from both offshore and onshore areas.
Royalties from onshore areas flow to the respective state governments and for offshore areas to the Centre, whereas cess from both onshore and offshore areas goes to the Centre.
Under the agreements in the pre-NELP phase, national oil companies were offered 10% participating interest with the private companies while signing PSCs and they could also claim 30% interest in case of a discovery. They also paid on behalf of private parties to the PSCs, which were completely exempted from paying any of these liabilities. In the pre-NELP regime, the government had signed 17 PSCs, under which ONGC and OIL were liable to pay all statutory levies, including royalty and cess, on behalf of the other private partners in the consortia.
These include levies paid on Panna Mukta Tapti blocks where ONGC pays up for its partners Reliance and British Gas or the Rajasthan blocks in Barmer where ONGC would have to pay on behalf of Cairn if the new norms do not kick in.
It is estimated that ONGC would have to cough up over $1bn in royalty and cess over the life of the Rajasthan fields where it farmed in after Cairn made a discovery. The amount would be more than ONGC’s 30% share in the oil production from the field.
The government may reimburse the statutory levies paid by national oil companies (NOCs) on behalf of their consortia partners of the pre-NELP era. The NELP regime started in 1991. Private parties involved in 17 production sharing contracts (PSCs) included Cairn Energy, Phoenix Overseas , Reliance Industries and Essar Oil.
The reimbursement will, however, be not made in cash. The amount will be adjusted against the profit petroleum payments being made by the two companies, sources said. The final nod of the Cabinet is expected soon. The government has received a significant amount from ONGC and IOC as statutory levies.
The reimbursement will, however, be restricted to the extent that the actual liabilities undertaken by the two PSUs on behalf of their private sector partners in the pre-NELP PSCs, a source in the government said.
ADVERTISEMENT
According to an estimate, the government received Rs 14,603 crore royalty from offshore areas alone in the three financial years between ’03 and ’06. Similarly, total cess (from onshore and offshore areas) received by the public exchequer in the same period was worth Rs 16,119 crore. It is said that only a part of this amount is paid by OIL and ONGC as statutory levies on behalf of their consortia partners. During the same period, the government received Rs 7,962-crore profit petroleum from both offshore and onshore areas.
Royalties from onshore areas flow to the respective state governments and for offshore areas to the Centre, whereas cess from both onshore and offshore areas goes to the Centre.
Under the agreements in the pre-NELP phase, national oil companies were offered 10% participating interest with the private companies while signing PSCs and they could also claim 30% interest in case of a discovery. They also paid on behalf of private parties to the PSCs, which were completely exempted from paying any of these liabilities. In the pre-NELP regime, the government had signed 17 PSCs, under which ONGC and OIL were liable to pay all statutory levies, including royalty and cess, on behalf of the other private partners in the consortia.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
