ONGC to be in a royal mess if states follow Gujarat cue

Jul 05 2014, 22:12 IST
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The oil major faces a Rs 3,400-crore extra royalty outgo if tax is paid on gross price of crude from April 2008 The oil major faces a Rs 3,400-crore extra royalty outgo if tax is paid on gross price of crude from April 2008
SummaryThe oil major faces a Rs 3,400-crore extra royalty outgo if tax is paid on gross price of crude from April 2008

of the realised price. Since payment of royalty at pre-discount price was an additional burden on ONGC and statutory limit was breached, ONGC represented its case to the petroleum ministry.

On May 23, 2008, after consultations with the law ministry, the petroleum ministry withdrew its October 2003 order, thereby allowing ONGC to start making royalty payments to states at the post-discount price with effect from April1, 2008. According to ONGC, it paid R3,419 crore in excess royalty to Gujarat between FY04 and FY08.

On September 27, 2011, Gujarat moved the high court, asking the court to direct ONGC to pay royalty at the pre-discount price (as has been the procedure since FY04 till FY08) and demanding R5,984.87 crore for April 2008 till December 2011.

On November 30, 2011, the Gujarat High Court decided that royalty on crude oil is to be paid on the pre-discount price and directed ONGC to make good the shortfall within two months.

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