Oil and Natural Gas Corp( ONGC) has agreed to pay Rs 8,000 crore as royalty fee to the Gujarat government settling a case which has been pending for over 3 years, reports CNBC-TV18. Of the total due, 15 percent will be paid by ONGC in FY17 and the rest in FY18.
ONGC has been fighting the case since 2013 when the Gujarat government first raised the issue over differences in royalty of crude the public sector undertaking (PSU) extracted since 2008.
According to the Oil Field Act, ONGC was required to pay to the state government, a royalty of 20 percent on the market value of crude it extracted from the oil block. However, ONGC argued that since it supplied crude at a discounted price to the oil marketing companies, it will pay royalty on the discounted price instead of the market price.
Considering ONGC’s annual profit is roughly Rs 22,000 crore, the payout would prove to be a huge burden on the company’s pockets. Income of upstream companies depends on either crude or volumes moving up, and ONGC is hit on both counts as of now. Read More…
Credit By : Moneycontrol.com
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