Crude oil price crash in the midst of the coronavirus pandemic has further hit the finances of the state governments as it has badly depleted yet another source of revenue in this difficult period.
States having oil and gas exploration and production blocks get hefty royalty on production of the hydrocarbons with rates varying from 7.5 per cent to 12.5 per cent depending on whether a block is on loans or in shallow water. Totality rates are lower for deep way and ultra deep water blocks.
The COVID-19 pandemic and destruction of demand for oil had resulted in an oil price crash that resulted in crude falling to $15-18 a barrel level in April, around $30 in May and close to $ 40 a barrel in June. This has substantially dented the earnings particularly of three states, Rajasthan, Gujarat and Assam that have the bulk on inland oil blocks and also affected royalty earnings of Andhra Pradesh, Tamil Nadu, Assam for gas blocks.
Sources said that Rajasthan, which has the richest source of oil in the country, has seen its totality earning falling declining to a fourth at about Rs 250 crore in April-June period from about Rs 1,000 crore it earned in the same period of last fiscal. Other states have also seen a similar decline as a fall in global crude oil prices directly impacts royalty earnings.
“This is a double whammy for states as their GST revenue has already fallen to record low levels in April and May due to lockdown. Most states are short of funds even to meet basic expenditure needs that has also increased during the pandemic. Some states have rushed to the Centre for loans and grants,” said an oil sector expert asking not to be named.
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