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The Parliamentary Standing Committee on Petroleum and Natural Gas has said the states where oil and gas production is taking place should be given at least 50% of the total quantity produced besides the royalty on natural gas produced from offshore fields.
The recommendations, if accepted, will boost Andhra Pradesh Government's revenues and economic activity as the state's coast hosts major chunk of oil and gas fields.
The committee, which submitted its report last month, has observed that the total gas production during 2012-13 was 40.7 billion cubic metres, out of which the share of private/ JV in the KG basin located in Coastal area adjoining Andhra Pradesh was 13.7 billion cubic metres -- 30% of the total natural gas production of the country.
However, the allocation to Andhra Pradesh is pegged at just 29.02 mmscmd in 2012-13 out of the total allocation of 216.27 mmscmd which works out less than 15%.
The committee said it is an insignificant privilege gain to Andhra Pradesh considering the quantum of gas produced in the state.
It said it is of the strong view that the policy should be re-examined and the industries in the states concerned or in the neighbouring regions should be given in the matter of allocation gas as the state in which the field is located will be very eager and interested to use the gas for its economic development.
"The committee therefore recommend MoPNG (Ministry of Petroleum and Natural Gas) to supply at least 50% of the gas produced to the industries belonging to the state where the fields are located," the committee said in its report.
Finding fault with the current allocation system, the committee said the cost incurred due to the transportation of gas to far off places is causing price escalation.
"Though the gas producing and nearby states have enough demands for gas, it is transported from east to west coasts and vice-versa entailing extra expenditure increasing cost of the gas," it observed.
The committee said the utilisation of gas in nearby areas or states could be more pragmatic and economical and transporting it to longer distances until a nationwide gas pipeline network is in place.
On royalty on gas produced from offshore fields, the committee said the rate applicable for gas produced from deep water fields under NELP is 5% of well-head price for first 7 years and 10% thereafter on ex-royalty basis.
However, in case of production from deep water royalty goes only to Central Government as all resources which are on the offshore areas belonging to the Centre.
The committee felt that the policy has put the states where the gas is being produced from offshore fields to disadvantageous position as they are being deprived of royalty arising out of the production of natural gas.
"Since the exploration and production activities are expected to increase in offshore and deep waters in the years to come, the committee therefore recommend that the MOPNG should device a policy for sharing the royalty earned from the offshore areas also with the State Governments concerned," the committee noted.
The committee was of the opinion that though, KG-D6 was one of the biggest gas discoveries in the recently years, Andhra Pradesh government is being paid no royalty.
Somabhai Gandalal Koli Patel, Lok Sabha member from Surendranagar constituency of Gujarat is the acting chairman of the Standing Committee.
