Private and public sector oil producers, who will face a “super profits” tax on output when their selling price for crude oil touches $75 per barrel if the BK Chatruvedi committee’s recommendations are accepted, say there is lack of clarity on whether they will continue to pay the current royalty of 20 per cent along with the proposed tax.
The committee, appointed by the prime minister, had recommended that the tax should be implemented in the case of oil blocks allotted before the New Exploration Licensing Policy (Nelp) was implemented in 1999.
Public sector oil companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) have to share all the revenue they earn when they sell their crude oil output for more than $75 per barrel. But private oil companies need to pay only 40 per cent of their revenues in such a case.
While ONGC and OIL welcomed the move, the private companies said since they were already sharing the benefits of high oil prices with the government through taxes, the additional burden was not needed.
“It has to either one or the other,” said an executive with a private sector oil company. Reliance Industries, Cairn India and British Gas are some of the private companies which produce oil and gas from blocks allotted before Nelp started in 1999.
ONGC and OIL welcomed the suggestion. “At least we are assured at least $75 from every barrel of crude oil we sell,” said an OIL official.
ONGC, for example, sold crude oil for $69 per barrel in the first quarter of the current financial year even as the average price during the quarter was $125 per barrel.
The committee has suggested that the government use the additional revenue to subsidise petrol, diesel, kerosene and cooking gas. ONGC and OIL give discounts to the state-owned oil marketing companies to partly compensate them for selling petroleum products at less than the production cost.
“The Chaturvedi Committee recommendations give us more clarity. Else we do not even know how much discounts we will pay during a particular quarter,” said an ONGC official.
