Oil and Natural Gas Corp will take a 16 billion rupee ($239 million) hit to its quarterly earnings to account for previous royalty payments to two states, the oil exploration company’s finance head A. K. Srinivasan said.
ONGC has already made a 25 billion rupee payment to the two states as royalty on crude oil produced from April 2014, but had not reflected this because it was under litigation, Srinivasan said on Tuesday.
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The Supreme Court has asked the federal government to compensate Gujarat and Assam for 150 billion rupees in lost revenues due to lower royalties paid by state-run explorers ONGC and Oil India Ltd. Indian law requires companies to pay 20 % of the market value of oil produced as royalty to states where oil blocks are located.
April 2008 the oil ministry asked ONGC and Oil India to pay royalty based on lower prices, as the two firms had given a hefty discount on crude sales to state refiners, in order to keep a lid on local fuel prices. However, last year the oil ministry asked the two firms to settle royalty dues from April 2014 based on the market value of oil produced.