Cabinet nod for exchequer payment of oil royalty differential

In a measure of relief for the Oil Industry Development Board, a cabinet panel on Wednesday approved payment of the crude oil royalty differential between the production sharing contracts and that notified for 28 fields in Arunachal Pradesh, Assam and Gujarat.

"The payment shall be through budgetary allocation instead of through Oil Industry Development Board (OIDB) fund from the year 2015-16 onwards," an official statement said after a meeting of the cabinet committee on economic affairs (CCEA).

"The standing committee on petroleum and natural gas, while examining the functioning of OIDB, recommended that differential royalty to the state government concerned may be made through budgetary allocation, in order to ensure proper utilization of OIDB fund," it said.

Currently the differential in royalty is paid to the states by the OIDB, which also needs funds because investments for the strategic crude oil reserves have depleted its cash to Rs.8,000 crore.

"The proposal will have a financial implication on government budgetary allocation, while the outflow from OIDB will be reduced accordingly," the statement said.

"The expected expenditure for the year 2015-16 has been estimated at Rs.56 crore comprising of Rs.30 crore for Arunachal Pradesh and Rs.26 crore for Gujarat," it added.