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Earlier, the PSU explorer was paying royalty on Cairn India’s behalf till the government put a rider on Cairn to pay its own share of royalty after its parent Cairn Energy sold the majority stake in the explorer to London-based NRI Anil Agarwal-promoted Vedanta Resources.
“We have received Rs 3,000 crore (from Cairn India). This will be reflected in the third quarter accounts,” said an ONGC official, who did not wish to be named. “We (ONGC) will pay 30 per cent plus service tax on these income,” he added.
Cairn India has settled its royalty bills with ONGC till September 2011. According to the production-sharing contract, ONGC will first pay the royalty. Later, Cairn India will reimburse its share to the government-run explorer. Hence the three-month gap, the official explained.
Cairn India agreeing to pay its own royalty has come as a big relief for ONGC, which would save nearly Rs 12,000 crore over the next 15 years. Cairn India is the operator of Barmer asset with 70 per cent participating interest, while ONGC holds the remaining 30 per cent.
According to earlier calculations, Cairn will have to fork out Rs 12,600 crore as royalty over the lifetime of the oilfield. After apportionment, ONGC will have to pay Rs 5,400 crore over 15 years as royalty. The total royalty at current rates will thus work out to Rs 18,000 crore, payable by Cairn and ONGC, which have ownership of the asset. In June last year, the cabinet committee of economic affairs (CCEA) had given its nod to the Cairn-Vedanta deal with two principal riders. First, it asked both Vedanta Resources and Cairn Energy to provide relief to ONGC on royalty. And secondly, Cairn India will have to withdraw the arbitration petition in international courts against the payment of a cess.
 Limited.JPG)
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