Rajasthan fears $204m loss in VAT from Cairn crude

Vol 12, PW 11 (16 Oct 08) People & Policy

Rajasthan’s demand for a refinery is no longer the main obstacle to Cairn India’s attempt to secure RoU approval for its crude pipeline to the Gujarat coast.

PETROWATCH learns state officials have turned their attention to the potential loss of significant amounts of revenue in Value Added Tax (VAT) payments to the state exchequor following the oil ministry’s decision to allow Cairn to shift the â€کdelivery point’ from the field boundary at Barmer - first to Salaya, but now to the village of Bhogat on the Gujarat coast. Contacted by this report, state officials in Jaipur confirm they are in regular contact with the oil ministry in Delhi to explain the revenue implications of the move to Bhogat.

“We wrote a letter to the oil ministry explaining the problem three months back,â€‌ reports a source in the state energy department. “But they have still not replied to us.

â€‌ A high-level meeting to resolve this potentially explosive issue has already taken place: in the last week of August, DC Samant, chief secretary in the Rajasthan government met oil secretary RS Pandey to voice his concerns about the tax loss. Following the meeting Pandey wrote back to Samant on September 24.

But instead of focusing on the revenue loss for Rajasthan, Pandey asked Samant to accelerate Right of User (RoU) permission for the 154-km stretch of the 673-km pipeline that passes through Rajasthan territory. Pandey, it seems, stressed that the state government should order the â€کcompetent authority’ in Rajasthan to immediately issue the draft RoU notification.

To this, Rajasthan state energy officials respond that the â€کcompetent authority’ is already in place. “Permission to lay the pipeline has already been given to Cairn by the oil ministry,â€‌ stresses a state energy official.

“Our job is only to facilitate that. Now the problem is between the Rajasthan state revenue department and Cairn.

â€‌ For its part, Cairn managing director Rahul Dhir wrote to state officials on July 30 to downplay fears of any revenue loss. In the letter Dhir assured the Rajasthan government that it would ask potential buyers of the crude to set up their offices within the state.