Gujarat readies for battle on Mauskar royalty report

Vol 5, PW 25 (13 Feb 02) People & Policy

DONT EXPECT OIL minister Ram Naik to put his all-important signature on the crude oil royalty report anytime soon.

We learn the report, submitted by joint secretary Jayant Mauskar in November last year, could become a political minefield over the crucial issue of royalty. Mauskar recommends royalty at 18% of the wellhead price.

But Gujarat wants 40%. Luckily, we learn Shastri Bhawan is "open" to negotiation.

Another issue is who will pay royalty arrears once the report is law. Mauskar suggests the Oil Pool Account should pay, not oil companies.

The finance ministry disagrees. Equally important is a proposal that royalty should be streamlined with lower NELP rates.

An industry analyst describes this proposal as "good economics but bad politics." Here again Gujarat is the stumbling block. "Gujarat wants increased exploration and increased royalty," he adds.

"They can't have it both ways. Companies won't commit money to exploration if they have to pay more royalty." Gujarat also objects to proposed lower royalty rates on oil from Improved Oil Recovery or Enhanced Oil Recovery projects, designed to encourage oil companies to invest money in these schemes.

On 26th April 2000, the oil ministry set up a panel headed by Mauskar to draw up a scheme on crude oil royalty backdated to 1st April 1998 for pre-NELP oil produced by ONGC, Oil India and private producers from small discovered fields. Mauskar's report does not apply to NELP oil.

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