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Govt mulls new compensation plan

business Updated: Sep 07, 2010 23:41 IST
Anupama Airy
Anupama Airy
Hindustan Times
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The ministry of petroleum and natural gas is finalising a proposal to compensate the people and communities that lose their land for oil and gas projects. How the royalty pie is split

The compensation — likely to range between Rs 300 and Rs 400 crore per annum — would be doled out of the royalty proceeds accruing to the Centre and the states from the producing oil and gas blocks in the country.

"It is proposed that 5 per cent of the total royalty accrued to each state government may be shared for this purpose along with a matching grant of equal amount to be contributed by the central government out of its royalty share coming out of production from offshore blocks," a senior petroleum ministry official told the Hindustan Times.

"A draft cabinet is being prepared for circulation among the concerned departments and ministries." Simultaneously, comments of State government, may also be sought on the proposal within a month, he added.

Royalty levied from companies producing oil and gas contributes significantly to the state and central kitty. In 2008-09, it was Rs 6500 crore excluding royalty from the recent gas production at Reliance’s KG-D6 fields and Cairn India’s oil fields at Barmer, Rajasthan.)

On the proposed mechanism for compensation to locals from royalty, petroleum ministry officials said the total royalty share to the sub-state level would be shared at different levels — district, block and village in the ratio of 25:25:50.

"Each of the sub-State level — district, block and village — will get their respective royalty share from the company directly as an untied fund which may be preferably used in energy and environment," the official said.

It is proposed that the oil or gas company concerned, which pays royalty on production of oil and gas, could retain the 5 per cent share of state royalty, which is allocated to the district.

The matching share from the Centre will be transferred to the company through the budget of the ministry of petroleum and natural gas.

Out of the 50 per cent to be given to the village level, half could be utilised by a group of individuals/families whose lands are affected by the project, as an untied fund for alternative livelihood.

The remaining half could be used for local community development as an untied fund — again, preferably in the field of energy and environment.

The land owners whose lands are used for laying of pipelines may, however, not get included for the purpose of royalty sharing as they get compensation separately for laying the pipeline.