ONGC, OIL pay Assam past oil royalty dues of Rs 1,450 cr

 While OIL Chairman and Managing Director Utpal Bora handed over a cheque of Rs 1,149.24 crore to Assam Chief Minister Sarbananda Sonowal, Oil and Natural Gas Corporation (ONGC) CMD Dinesh K Sarraf presented a cheque of Rs 300.64 crore.

Speaking on the occasion, Pradhan alleged that Congress President Sonia Gandhi in a bid to "punish people of Gujarat for re-electing Narendra Modi as Chief Minister in 2007" had changed the way royalty is paid to crude oil producing states.  

In trying to target Gujarat, Assam too became a victim, he said. Assam Finance Minister Himanta Biswa Sarma too said the methodology of charging royalty was changed to "curtail economic prosperity of Gujarat" but in the process "Assam too was weakened." According to the Oil Field Act, ONGC/OIL are required to pay 20 per cent royalty on price of crude oil it extracts from onland oil blocks to the state governments.

But the government in 2004 order asking them to share a part of the subsidy on petrol, diesel and cooking fuels LPG and kerosene by way of giving discount of crude oil they sell to refiners. In 2008, the government asked them to pay royalty on the discounted price, thereby impact revenue of oil producing states like Gujarat and Assam.

Gujarat government in 2011 filed a petition before the High Court, stating that it should be paid royalty at market rate and the difference in royalty payment since 2008 at pre- discount rate (in comparison to market rate) was computed at Rs 9,000 crore to Rs 10,000 crore. 

The High Court ruled in its favour in November 2013. Oil and Natural Gas Corporation challenged the decision in the Supreme Court which asked the company pay Gujarat at gross or pre-discount price during pendency of the petition. While Gujarat was getting royalty at pre-discounted rates, Assam was paid the duty at discounted rate. The government last month ordered ONGC and OIL to pay Assam royalty at pre-discounted rates from back date of February 2014. The royalty for the period since February 2014 was paid to Assam government on Thursday.

Pradhan said he had in April 2015 asked the then Assam Chief Minister Tarun Gogoi to also take the Gujarat route and field petition in court but "they filed a petition but did not fight it." 

"Gross injustice was done to Assam and today we are here to rectify that," he said. Sarma blamed former Prime Minister Manmohan Singh for doing injustice to Assam by imposing an unfair royalty calculation formula despite representing the state in the Upper House. Sonowal said the former Prime Minister did not do anything to benefit the state due to his "non-commitment to Assam". 

Earlier, on Wednesday Pradhan had asked the Finance Ministry to reduce the cess on domestically produced crude oil to 10-12 per cent from current 20 per cent to provide relief to producers hit by slump in prices.

After oil producers including state-owned Oil and Natural Gas Corporation and private sector Cairn India pleaded for reduction in cess, the ministry had written to Finance Ministry to revise the rate to 10-12 per cent ad-valoren or alternatively consider introducing of a graded system of cess rate.

"It should be according to market dynamics. I am recommending to Ministry of Finance to look into expectations of E&P sector," he said. In the Budget for 2016-17, Finance Minister Arun Jaitley had moved from a fixed Rs 4,500 per ton cess on domestically produced crude oil to a percentage of oil prices or ad valorem rate of 20 per cent, a move that was supposed to give relief to upstream firms.