Centre agrees to pay Rs 6,320 crore as oil royalty to Assam

NEW DELHI: The Centre on Tuesday agreed to pay Rs 6,320 crore to the Assam government as crude oil royalty as part of an out of the court settlement after eight years of protracted legal battle. The amount will be paid by the central government to the Assam government over a period of three financial years commencing 2016-17.

Assam Chief Minister Sarbananda Sonowal thanked Prime Minister Narendra Modi, Finance Minister Arun Jaitley and Petroleum Minister Dharmendra Pradhan for the "proactive and bold steps" which led to the out of the court settlement.

"The Central and state governments were fighting in courts over the oil royalty issue since 2008 when both the governments were ruled by the Congress. "But within nine months of the BJP government coming into power in Assam, we have resolved the dispute and the central government agreed to pay Rs 6,320 crore as oil royalty. We are thankful to the Modi government," Sonowal said here.

While in 2016-17, the central government will pay Rs 948 crore, in 2017-18 it will pay Rs 2,844 crore and in 2018-19 will pay Rs 2,528 crore. This is in addition to the Rs 1,450 crore already received.

The Oil India Limited produces 3.2 million tonnes crude oil in Assam annually, while Oil and Natural Gas Corporation Limited produces 1.1 million tonnes crude oil every year in the state. The OIL and the ONGC have been paying royalty to the central and the state governments in terms of statutory provisions of oilfields (Regulations and Development) Act 1948 and Petroleum and Natural Gas Rules, 1959.

The Petroleum Ministry on October 30, 2003 had directed upstream companies, including ONGC, to give discount in price on sale of crude oil to the Oil Marketing Companies.

The notional price of the crude oil produced by upstream companies is initially derived on the basis of the average international price and then discounts are fixed as decided by the central government.

It had also been provided that the discount offered by upstream companies would not affect the royalty payable to the state governments. Accordingly, upstream companies paid the royalty on prediscount price during 2003-04 to 2007-08. However, keeping in view representation made by the companies, statutory provisions and the opinion of the Law Ministry on the issue, the Petroleum Ministry on May 23, 2008 withdrew the provisions that the revenue of the state government in term of royalty on crude oil will not be affected by the discount given on crude oil prices.