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Our Bureau

New Delhi , Jan. 4

THE Petroleum Ministry has sought legal opinion on the dispute over payment of a production tax by Cairn Energy of UK on the crude oil it plans to produce from the Barmer district in Rajasthan.

"Cairn Energy signed a contract for the Rajasthan block that did not specify who will pay the statutory levy. Now that is to be settled legally. So we have sought legal opinion and are awaiting clarification on the issue,'' the Union Petroleum Minister, Mr Mani Shankar Aiyar, told reporters here. While Cairn is the operator of the field, ONGC is the licensee.

The British company plans to produce 80,000 to 100,000 barrels per day from its Mangala and Aishwariya fields in Rajasthan, but has protested the levy of a cess of Rs 900 per tonne of crude oil produced from the fields.

Cairn claims that the Rajasthan block is a pre-NELP (New Exploration Licensing Policy) block where state-run ONGC, as the licensee, was made responsible for payment of all statutory levies such as royalty and cess.

However, the Petroleum Secretary, Mr S.C. Tripathi, said that while the production sharing contract (PSC) for the Rajasthan block had clearly mentioned that royalty will be paid by ONGC, it does not mention anything on payment of production cess.

"Naturally, the cess is to be paid by the producers. Cairn and ONGC are partnering in Mangala and Aishwariya fields and they will have to pay the cess in proportion of their shareholding,'' he stated.

ONGC had late last month exercised its rights to take a 30 per cent stake in the two fields Cairn plans to put on production.

Mr Tripathi said ONGC has disputed the payment of statutory levies such as royalty on behalf of private sector partners in pre-NELP blocks such as Cairn's RJ-ON-90/1 block in Rajasthan.

``ONGC says that what they get out of taking a 30 per cent stake in terms of crude oil is much lesser than what they pay towards statutory levies. This is a genuine issue and we are looking at it,'' he said.

The Government may compensate ONGC for the statutory levies. ONGC paid Rs 229 crore as cess and royalty until September 2004 on behalf of its partners in Blocks PY-3 and Lakshmi field.

Though the oil finds in Rajasthan are the largest in more than two decades, ONGC had baulked at exercising its right to take 30 per cent stake in the block as it would have also forced it to make payment of statutory duties of royalty not just on its behalf but also on behalf of its private sector partner.

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