05 August 2008; expressindia.com: New Delhi: State-run Oil and Natural Gas Corp has offered to pay a super profit tax (SPT) on any financial gains above USD 50 per barrel, but wants the present ad-hoc system of sharing fuel subsidies to be scrapped.
As per the offer, which backs the demand of the Left and the Samajwadi Party for levy of windfall profit tax from refiners and crude oil producers, the company is willing to pay three-fourths of anything above USD 50 a barrel as SPT.
ONGC, which earned USD 125.85 per barrel on crude oil it produced in April-June quarter, has suggested to the B K Chaturvedi Committee that the Rs 2,500 per tonne cess on domestic crude oil be converted into ad-valorem rates so that the government gets incremental revenues whenever crude prices rise.
"Base price of crude oil be fixed at USD 50 per barrel on which there would be no subsidy sharing... ONGC further proposes that beyond this crude oil price, additional tax may be levied, ONGC said.
The same may be 75 per cent of the incremental revenues beyond the crude price of USD 50 a barrel," it added.
Of the USD 125.85 a barrel gross realisation on crude oil produced, ONGC got a net revenue of only USD 69.14 a barrel after paying for subsidies on domestic cooking gas (LPG), kerosene, petrol and diesel.
Upstream firms like ONGC bear one-third of the revenue losses on fuel sales retailers IOC, BPCL and HPCL suffer on not being allowed to raise prices in line with cost.
ONGC wants this subsidy-sharing scheme to be replaced by the WPT or super profit tax regime.
The company despite paying Rs 9,811 crore in subsidies in Q1, earned a net profit of Rs 6,636 crore. In 2007-08, ONGC's subsidy share was Rs 22,001 crore.
ONGC, in its representation to Chaturvedi Committee, said that its proposal was based on the Chinese model for WPT where a 40 per cent additional tax is levied on crude price of over USD 60 per barrel.
As per its suggestion, ONGC would have paid out USD 56.88 per barrel in Q1 as against actual payout of USD 56.71 a barrel.
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