The Centre will be the major beneficiary of the Rs 50 per tonne increase in the provisional rates of royalty on crude oil approved by the petroleum ministry on Tuesday. State governments will be a poor second.
A quick assessment of the royalty revision indicates that while the Centre will rake in Rs 100 crore more on an annualised basis, state governments will get only an additional Rs 50 crore.
The entire royalty on crude oil produced from offshore fields goes to the Centre, while royalty from onshore fields goes to states where these fields are located.
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Since, two-thirds of the country's oil production comes from offshore oil fields and only one-third from onshore fields, it implies that two-third of the royalty will go to the Centre and one-third to states. The country produces around 30 million tonnes of crude oil every year. This means that 20 million tonnes comes from offshore oil fields and 10 million from onshore fields.
Total addition to the royalty basket will be around Rs 150 crore a year, of which Rs 100 crore, will go to the Centre and Rs 50 crore to states. This dispels the impression created by the official press release issued on Tuesday which said: "This decision will benefit the oil producing states."