ONGC seeks changes in royalty payment criteria
ONGC has demanded that royalty on crude oil be levied on the price it realises from refiners instead of the current practice of calculating the levy on pre-discount rates, which has led to an excess payout of Rs 1,106 crore in the last three fiscals.
By PTI |
NEW DELHI: Oil and Natural Gas Corp (ONGC) has demanded that royalty on crude oil be levied on the price it realises from refiners instead of the current practice of calculating the levy on pre-discount rates, which has led to an excess payout of Rs 1,106 crore in the last three fiscals.
"The royalty is to be paid on price realised, which currently is the price we get after extending discounts to refiners. But we are asked to pay royalty on the pre-discount price, which is unfair," a top company official said.
ONGC has to pay a 10 per cent royalty on the price realised from rates at which crude oil from onland fields is sold. Since 2003-04, ONGC has been asked to make up for one-third of the revenue loss on selling domestic LPG and kerosene below the cost by way of discounts on crude oil it sells to refiners IOC, BPCL and HPCL.
But royalty continues to be levied on pre-discount prices.
"In 2005-06, we paid a total royalty of Rs 2,182 crore. In case royalty is allowed to be paid on post-discount prices, we would have paid only Rs 1,486 crore," the official said.
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This year, ONGC extended a discount of 26.5 dollars a barrel in April-June quarter but royalty is being levied at the pre-discount price of about 72 dollars per barrel. Similarly, in the second quarter this fiscal, a discount of 26.1 dollars a barrel is being extended."We shelled out about Rs 5,120 crore for LPG and kerosene subsidy by way of discounts in the first quarter. In Q2, our payout will be Rs 5,023 crore. On top of this, we are supposed to pay royalty on pre-discount price, which is unfair," the official said.
The official said ONGC paid Rs 1,499 crore royalty in 2004-05 and Rs 1,130 crore in 2003-04. In case royalty was allowed to be paid on post-discount prices, the company would have paid only Rs 1,256 crore in 2004-05 and Rs 963 crore in 2003-04.
"We made excess payment of Rs 696 crore in 2005-06, Rs 243 crore in 2004-05 and Rs 167 crore in 2003-04," he said.
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The Oil Ministry, he said, was sympathetic to ONGC's pleas for calculating royalty on post-discount prices but no decision has been taken to reverse the anomaly.Upstream firms ONGC, GAIL and OIL were to pay Rs 24,000 crore subsidy out of the Rs 73,500 crore under-realisation on selling petrol, diesel, LPG and kerosene estimated for the fiscal.
For July-September quarter, ONGC has been asked to pay out Rs 5,023 crore, GAIL Rs 379 crore and Oil India Ltd (OIL) Rs 589 crore.
But with crude oil falling by over USD 10 a barrel from the $67 average taken to calculate the Rs 73,500 crore figure, the under-realisation is now estimated at Rs 57,000-60,000 crore, industry sources said.
This reduction would translate into a proportionate reduction in upstream's share and oil bonds issued by the government, which had originally estimated an issue of oil bonds worth Rs 28,300 crore.
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