Gujarat and Arunachal win royalty battle

Vol 6, PW 14 (11 Sep 02) People & Policy

GUJARAT AND ARUNACHAL Pradesh can celebrate! After 10 years the oil ministry has finally agreed to pay them the prevailing rate of Rs850 royalty per tonne for crude produced from 13 onland fields offered under the first round of bidding for discovered fields.

We understand a cabinet note on the subject is circulating within various ministries and will shortly be signed by oil minister Ram Naik. When that happens, a patently unjust situation will be set right even though it has taken a decade and tireless lobbying by both states.

Until now Gujarat and Arunachal Pradesh are paid the prevailing Rs850 rate of royalty for crude from fields offered under the second round of bidding for discovered fields, but not from the first round. "As a precedent exists for paying more royalty under the second bidding round it was impossible to justify the situation." Why did it continue for so long Due to the absence of an official piece of paper saying otherwise.

Operators of the 13 fields need not worry. They will continue to pay royalty at Rs481 per tonne ($10) as they are protected by a fiscal stability clause in the production sharing contracts.

Shastri Bhawan will pay the difference out of Rs900 tax (cess) per tonne ($18.75) that it collects from operators. "The amount involved is not more than Rs2cr a year." Gujarat and Arunachal Pradesh will also receive Rs8cr ($1.6m) arrears in royalty from 1992 till March 2002.

We understand the finance ministry strongly opposed the payment ofRs8cr arrears, but Gujarat and Arunachal Pradesh stood firm and eventually won.