FinMin not Parting with Cess for Developing Oil Sector
India’s oil industry has paid over Rs 118,500 crore cess on the output of crude oil and natural gas in three decades, but not even 1% of this could be utilised for developing the sector, an oil ministry note said.
The oil ministry has asked the finance ministry to provide 75% of the annual cess collection to the Oil Industry Development Board, (OIDB). The finance ministry, which shares a huge oil subsidy bill, is, reluctant to part with the cess money, said officials.
The note for a parliamentary panel said the government has paid only Rs 902 crore to the Board since its inception in 1974. It said the cess is credited to the Consolidated Fund of India. The government’s budget can allocate to the board “such sums out of cess proceeds as it may think fit for being utilised for the purpose of the Act,” the note said.
“Nothing has been has been paid by the Central government to OIDB since 1992-93,” the note said. OIDB, headed by the petroleum secretary, is an inter-ministerial board, which is responsible for utilising the cess for development of the oil and gas sector.
The oil ministry wants the finance ministry to release funds to OIDB for investment in strategic oil reserves and an oil insurance corpus. The board needs Rs 1,195 crore for investing in strategic oil reserves and Rs 1,000 crore for an insurance fund, which was required after foreign re-insurers refused to provide cover to Iranian oil imports. “Through there is some respite from the US sanction, the proposed insurance fund plan is not yet shelved,” one official said requesting anonymity.
The cess was imposed on domestic petroleum output in 1974 through a legislation. Initially, the cess amount was Rs 60 per tonne, which was gradually raised to Rs 4,500 per tonne last year. It is not levied on auctioned blocks. OIDB generates its income through interest income on the loans given to various oil companies, the note said. According to OIDB officials, the current corpus of OIDB is Rs 10,726 crore, which includes cess and interests on loans. OIDB, which was initially exempted from paying income tax, was brought into the tax net in 2003.
The board extended about Rs 2,307 crore loans to state oil firms in 2012-13 and plans to lend Rs 2,000 crore to them for various activities. Gail India and Indian Oil Corp are the two biggest borrowers, with total funding over Rs 4,000 crore. So far, the board has an outstanding of Rs 7,647 crore. Its other beneficiaries are Gail gas, Hindustan Petroleum Corp and Bharat Petroleum. Activities of several departments of the oil ministry, such as Directorate General of Hydrocarbons and Petroleum Conservation Research Association, are also funded by OIDB.
India’s oil industry has paid over Rs 118,500 crore cess on the output of crude oil and natural gas in three decades, but not even 1% of this could be utilised for developing the sector, an oil ministry note said.
The oil ministry has asked the finance ministry to provide 75% of the annual cess collection to the Oil Industry Development Board, (OIDB). The finance ministry, which shares a huge oil subsidy bill, is, reluctant to part with the cess money, said officials.
The note for a parliamentary panel said the government has paid only Rs 902 crore to the Board since its inception in 1974. It said the cess is credited to the Consolidated Fund of India. The government’s budget can allocate to the board “such sums out of cess proceeds as it may think fit for being utilised for the purpose of the Act,” the note said.
“Nothing has been has been paid by the Central government to OIDB since 1992-93,” the note said. OIDB, headed by the petroleum secretary, is an inter-ministerial board, which is responsible for utilising the cess for development of the oil and gas sector.
The oil ministry wants the finance ministry to release funds to OIDB for investment in strategic oil reserves and an oil insurance corpus. The board needs Rs 1,195 crore for investing in strategic oil reserves and Rs 1,000 crore for an insurance fund, which was required after foreign re-insurers refused to provide cover to Iranian oil imports. “Through there is some respite from the US sanction, the proposed insurance fund plan is not yet shelved,” one official said requesting anonymity.
The cess was imposed on domestic petroleum output in 1974 through a legislation. Initially, the cess amount was Rs 60 per tonne, which was gradually raised to Rs 4,500 per tonne last year. It is not levied on auctioned blocks. OIDB generates its income through interest income on the loans given to various oil companies, the note said. According to OIDB officials, the current corpus of OIDB is Rs 10,726 crore, which includes cess and interests on loans. OIDB, which was initially exempted from paying income tax, was brought into the tax net in 2003.
The board extended about Rs 2,307 crore loans to state oil firms in 2012-13 and plans to lend Rs 2,000 crore to them for various activities. Gail India and Indian Oil Corp are the two biggest borrowers, with total funding over Rs 4,000 crore. So far, the board has an outstanding of Rs 7,647 crore. Its other beneficiaries are Gail gas, Hindustan Petroleum Corp and Bharat Petroleum. Activities of several departments of the oil ministry, such as Directorate General of Hydrocarbons and Petroleum Conservation Research Association, are also funded by OIDB.
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