MINISTER OF STATE IN THE MINISTRY OF PETROLEUM & NATURAL GAS (SMT. PANABAAKA LAKSHMI)
(a) and (b): Royalty on production of crude oil and natural gas is payable to the Central
Government (for production from offshore fields) and to the State Governments (for production
from onshore fields) in terms of the statutory provisions of Oilfields (Regulation and
Development) Act 1948 (ORDA), Petroleum & Natural Gas (PNG) Rules 1959, Petroleum & Natural
Gas (Amendment) Rules, 2003 read with notifications/resolutions dated 17th March, 2003, 16lh
December, 2004, 20th August, 2007 and 28th August, 2009 issued by the Government under the
ORDA from time to time.
Royalty on crude oil to the Central and State Government is paid at the rates specified in
the Schedule to ORDA on the well head price determined in terms of aforesaid statutory
provisions.The current schedule of royalty rates is attached at the annexure.
(c) and (d): In view of Government of India`s directives, vide letter dated 30th Octo, 2003,
since 2003-04 Oil and Natural Gas Corporation Limited(ONGC) has been allowing discount to Oil
Marketing Companies (OMCs) on sale of crude oil. As per the above letter, ONGC was initially
directed that revenue of State Governments in terms of royalty on crude oil should not be
affected by the discount. In view of specific directive, since April. 2003, ONGC paid royalty
on production of onshore crude to State Governments on pre-discount sale price though royalty
on production of offshore crude oil to the Government of India was paid at post-discount sale
price, in line with statutory provisions.
Subsequently, Ministry of Petroleum & Natural Gas vide letter No.P-20012/28/97-pp(Part-II-A)
dated 23 May, 2008 withdrew the earlier directives issued vide letter dated 30th October, 2003,
Consequently. ONGC started making payment of royalty to State Governments also on post discount
price from 01st April, 2008.
(e) and (f): The State- Governments of Gujarat and Assam have represented to the
Government of India on the issue of payment of royalty. After examination, Government
of Gujarat was informed on 07.07.2009 that in respect of offshore crude oil, the Royalty
paid by upstream companies to the Central Government has always been on the basis of
post-discount prices. There is nothing in the legal provisions to suggest that payment of
onshore Royalty to State Governments should be on a different principle.
Government of Gujarat had filed a Special Civil Application in the High Court of Gujarat,
Ahmedabad on 27th September, 2011 for payment of royalty at pre-discount prices. At
present the matter is sub-judice.
Against above Special Civil Application, Hon`ble Gujarat High Court, vide its order dated
30th November, 2011 has decided that royalty on crude oil is to be paid on pre-discount
price and directed ONGC to make the payment towards shortfall royalty for the period
April, 2008 till date, within a period of two months.
ONGC is contemplating filling on appeal in Hon`ble Supreme Court of India against the
order of Hon`ble Gujarat High Court.
