The government has notified a new policy requiring state-owned Oil and Natural Gas Corp ltd (ONGC) and Oil India ltd (OIl) to pay royalty and cess tax only to the extent of their equity holding in certain pre-1999 oil and gas fields.
The 'Policy Framework for Streamlining the Working of Production Sharing Contracts in respect of Pre-NElP and NElP Blocks' was notified in the Gazette of India yesterday, according to the Gazette notification.
Till now ONGC and OIl had to pay 100 per cent royalty and cess tax on 11 pre-New Exploration licensing Policy (NElP) fields that were given to private firms prior to 1999.
The government had awarded some discovered oil and gas fields to private firms in the 1990s with a view to attracting investments in the country.
To incentivise such investments, the liability of payment of statutory levies like royalty and cess was put on state-owned firms, who were made licensees of the blocks. ONGC and Oil India ltd were allowed right to back in or take an interest of 30-40 per cent in the fields, but were liable to pay 100 per cent of the statutory levies.
The new rule, which last month approved by the Cabinet, will apply to 11 fields like Dholka field in Gujarat that is operated by Joshi Oil and Gas. It will also apply to Hindustan Oil Exploration Company (HOEC)-operated PY-1 field in Cauvery basin.
"In pre-NElP exploration blocks, the National Oil Companies, as licensee are liable for payment of royalty, cess and other statutory charges on entire production of oil and gas.