ONGC falls 3% on Rs 5000-6000 cr royalty due to Guj govt - 02.12.2013 Shares of ONGC fell 3 percent in intraday trade on being asked to clear huge royalty due to the Gujarat government. The Gujarat High Court has directed the PSU to pay dues worth Rs 5,000-6,000 crore to the state government towards differences in royalty of crude it extracted since 2008. According to the Oil Field Act, ONGC is required to pay 20 percent royalty of the market value of crude oil it extracts from oil blocks to the state government. ONGC used to pay such royalty to the Gujarat government. However in 2004, the central government had asked it to provide crude to IOC as burden-sharing mechanism, at a discounted rate. This was since IOC was offering subsidies on diesel, kerosene and liquefied petroleum gas (LPG) to consumers, resulting in huge losses to the latter. Since ONGC started providing crude to IOC at a discounted rate, it started paying royalty to the state government at post-discount rate, resulting in drastic reduction in royalty to Gujarat. The state also complained to the Centre in this regard. In 2011, the state government filed a petition before the high court, stating that it should be paid royalty at market rate and the difference in royalty payment since 2008 at pre-discount rate (in comparison to market rate) was computed at Rs.5,000-6,000 crore. The state government counsel, Aspi Kapadia, informed the court that ONGC, at times, provided crude to IOCL at a huge discount of 96 percent, which resulted in huge downfall in royalty payment to the state. The state, he argued, must be paid royalty at market price. Directing ONGC to make payment of differences of royalty to the state within two months, the court also asked it to pay royalty, in future, at market rate. At 09:38 hrs, the stock was quoting at Rs 290.50, down Rs 8.00, or 2.68 percent on the BSE. ****Source: Moneycontrol
Posted on: Mon, 02 Dec 2013 05:08:01 +0000
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