The central government has lowered the charges for domestic production of crude oil, with immediate effect. With the latest revision, the royalty on onshore crude oil stands reduced to 10 per cent from 16.66 per cent, and on offshore crude to 8 per cent from 9.09 per cent, according to an official notification.
In case of natural gas, using the new flat deduction formula, the royalty stands revised to 8 per cent from 10 per cent.
Typically, these rates linked to crude oil prices and production geography.
What is royalty on crude oil? Why is it charged?
The central government levies royalty on companies producing petroleum from domestic oil fields. This levy is charged in two categories: onshore and offshore.
It is essentially a payment that these companies make to the government for extracting a natural resource owned by the nation.
It is applicable only to domestic crude production, not imported oil.
Onshore royalty applies to oil fields located on land, while offshore royalty applies to production from fields located in sea areas.
The purpose of these charges is to compensate the government for resource extraction, and to generate public revenue.
This ensures that the nation benefits financially from the commercial exploitation of its natural resources.
