Raj govt demands 4% VAT on sale of crude from Cairn`s Barmer field

Last Updated: Saturday, October 10, 2009 - 21:51

Jaipur: The Rajasthan government has slapped a notice on Cairn India demanding the company to pay 4 percent VAT instead of 2 percent CST on the sale of crude oil from the explorer`s oil fields at Barmer in the state.

The company, on September 25, 2009, has made an online payment of Rs 1.43 to the state government’s commercial tax division against CST over the sale of crude from the oil fields in the month of August.
C K Mathew, principal secretary (finance), said that the oil company will have to pay VAT as the point of sale is located in Rajasthan.

"We have sent a notice to the company in this regard. Cairn India has entered into an agreement with the state government, which clearly states that the point of sale would be in Rajasthan.

"In this case when the state government is entitled to accrue 4 percent VAT on the oil, why the company has paid CST? We will not accept anything less than 4 percent on the sale of oil," he said.

The government has nominated Indian Oil Corp, Hindustan Petroleum Corp and Mangalore Refinery and Petrochemicals (MRPL) for purchasing crude oil from Rajasthan fields.

Cairn, on August 29, started production from its Barmer fields.
Oil from the giant Mangala field in the block is transported by trucks and tankers to Kandla on the Gujarat coast for onward shipment to MRPL. The heavy and waxy crude oil is being sold at a discount of about 10-15 percent to the six-monthly average of Brent crude oil.

Cairn India had earlier pointed out that the company will pay a royalty of Rs 8 crore per day at peak production. This is over and above the 50 percent profit petroleum that Centre will get from crude sales once production starts. Profit petroleum is the government`s share of profit from an oilfield.

The company is expected to pump 1,75,000 barrels of oil from the three fields in Rajasthan at peak production. Though it will take two years for the company to reach peak production, the royalty even at initial production levels is expected to run into lakhs.

Bureau Report

First Published: Saturday, October 10, 2009 - 21:51

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