Royalty on indigenous crude hiked

NEW DELHI: The Cabinet on Tuesday night hiked the royalty on indigenous crude oil to 20 per cent from the existing 12.5 per cent at present.
The royalty had been revised upwards following repeated requests made by the oil producing states, Parliamentary Affairs Minister Sushma Swaraj told reporters after a Cabinet meeting chaired by Prime Minister Atal Bihari Vajpayee here.
She said the states of Gujarat and Assam would be benefitted by the hike in royalty.
According to official sources, 20 per cent royalty would be charged on the wellhead price of crude oil produced from areas granted to national oil companies on nomination basis, exploration blocks awarded to private contracts prior to NELP (New Exploration Licensing Policy) and onland discovered fields awarded to private/ joint venture contractors, official sources said.
Presently, royalty on crude oil produced from pre-NELP blocks is taxed at Rs 850 per tonne while the NELP blocks are levied ad valorem rate of 20 per cent tax. Currently, royalty (a form of production tax) is shared between the Centre and the states concerned.
For crude oil production from onland areas, royalty will be paid at the rate of 20 per cent of the wellhead price till 2006-07. From 2007-8, royalty rates would taper by 1.5 per cent each year so as to facilitate convergence with NELP rates of 12.5 per cent within a period of five years (2011-12), they said.
For crude oil production from shallow water offshore areas, royalty would be paid at the rate of 20 per cent of the wellhead price during 2002-03 and thereafter at rates tapering by two per cent in each subsequent year till 2007-08, so as to converge with the NELP rate of 20 per cent.
For crude oil production from deepwater area, the royalty rates during the first seven years of commercial production would be half of the rates of shallow water areas.