Mauskar submits crude oil royalty panel report

Vol 5, PW 23 (16 Jan 02) People & Policy

Royalty payments from onshore oilfields is a highly sensitive political issue in India.

Oil producing states Assam, Andhra Pradesh, Gujarat, Nagaland, Tripura have for long clamoured for more royalty from oil explorers. On 26th April 2000 the oil ministry set up a panel headed by joint secretary Jayant Mauskar.

PETROWATCH learns Mauskar submitted his voluminous report in the last week of November. His brief was to draw up a new scheme on crude oil royalty backdated to 1st April 1998 for oil produced under pre-NELP arrangements by ONGC, Oil India and private producers from small discovered fields.

The panel examined the following issues: Whether royalty should be on ad valorem basis (as a proportion of the price received by producers) or a flat rate (current system) What should be the crude oil price for determining royalty Should it be the sale price including levies (cess and royalty) or sale price net of levies, or well head price or based on the international price How to determine well head price Should there be different royalty rates for onshore and offshore areas and for various states and lower rates for oil from enhanced oil recovery or improved oil recovery projects Should there be a single royalty regime in line with NELP or should royalty rates be gradually aligned (over time) with NELP rates What should be the royalty regime from 1st April 1998 to 31st March 2002, and after that when the domestic oil sector is liberalised Where should cess (now Rs900 per tonne - $18.75 per tonne) on crude oil figure in determining crude oil royalty Should the crude oil price or well head price (for royalty calculations) be determined by an independent agency Mauskar's report tries to walk the tightrope between the demand of states for more royalty and the need to invest more funds in exploration and production. For inputs the panel consulted extensively with state governments, ONGC, Oil India, chambers of commerce and industry and the Oil Co-ordination Committee.

It also studied royalty regimes around the world. For the main recommendations, see next story.

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