Assam and Gujarat lobby for 40% royalty per tonne

Vol 6, PW 12 (14 Aug 02) People & Policy

CONCESSION OR NO concession, Gujarat and Assam will never be satisfied with whatever the oil ministry decides.

In June, Narendra Modi, Gujarat chief minister, and Tarun Gogoi, Assam chief minister, wrote separate letters to oil minister Ram Naik with an identical demand: royalty should be 40% - double the figure proposed by Mauskar. Modi has other irreconcilable demands.

For calculation of royalty, he wants Gujarat's domestic crude priced at import parity, not the wellhead price. He also wants royalty calculated at 100% international parity and backdated from 1st April 1998, not in a phased manner proposed by Mauskar.

According to Modi: "Royalty is a proprietary right of the state and should be protected and for whatever reserves are left the state needs to get the maximum benefit. For the last 30 years ONGC has been producing from Gujarat and has earned profit and amortised costs many times over by taking out depreciation." Modi and Gogoi oppose moves to converge the onland royalty rate with the much lower 12.5% rate under NELP.

"The government should reduce taxes on hydrocarbons produced from nomination fields with state-owned oil companies rather than slash royalty rates if it wants to bring ONGC and Oil India to a level playing field with NELP producers." Modi's demands don't stop there. He lays claim to 50% of the Rs1, 800 cess (tax) that Delhi levies on a tonne of crude so he can use it to fund state-owned Gujarat Petroleum! "Cess is used to meet the budgetary demands of the government of India," argues Modi.

"Not to increase exploratory efforts."

LNG Summit