Not many readers agree with the title of this piece. The falling crude prices has generated a lot of wind-fall profit or savings in oil budget in last two financial years. Govt.of India is happy by this development as this saving could be used for development works. And people are happy in anticipation that govt. shall also extend the benefit of savings to poor. So the pertinent question arises then how such a profitable venture can have bad effects. This is happening because every incident has bad or good effects like 2 sides of a coin. An example from Rajasthan oil fields shall clearly elucidate this concept.
Oil discovery in Rajasthan is a recent phenomena. It all started in 1996 when Dutch oil giant Shell International got license to explore desert of western Rajasthan.After preliminary survey and few boreholes they gave up by selling this license to another big company M/s.Cairn Energy(UK). This company launched an extensive seismic survey programme through an Indian subsidiary Cairn-India followed by drilling with the result that first oil discovery was made in 2004.Supported with encouraging field data company continued its work and has discovered 38 oil fields in Barmer-Sanchore Basin these are namely Mangla, Bhagyam, Shakti Ashwariya Guda, Saraswati, Raageshwari, Kaameshwari, Vijaya, Vandana, GRF, NI, Bhagyam South-1, NH-2, N-R-4, NE, GS-V-1 & Tukaram. 4.1 billion barrels of Oil in-place (i.e. 500 million tonnes) have been proved alone in Barmer-Sanchore Basin, Mangla Oil discovery of Barmer-Sanchore Basin has been rated as one of the biggest on-land discovery of the country in last three decades.
The production of Crude Oil from Rajasthan has commenced from 29th August, 2009 and 467.98 lakh metric tonn (338.50 million barrels)of crude oil has been produced from Barmer-Sanchore Basin till 31 March 2016.
As per the latest estimates made by Cairn India 6.5-7.2 Billion barrels (i.e. 900-1000 million Tonnes) million tonnes of oil equivalent resources can be tapped from Unconventional and Tight Reservoir in Barmer-Sanchore Basin.
As per present scenario Rajasthan oilfields contribute 24% of total indigenous production.
Now after these basic data about oil production we are back to basic question? Actually oil revenues paid by oil companies is based on crude oil prices in international markets. Fluctuations in this also affects the revenue figures. The falling crude prices have reduced the oil revenues to Rajasthan state govt. by huge margins as can be seen in following table.
Petroleum Production & Anticipated Revenue(source Raj.Govt.petroleum deptt.site)
|Years||Production rate per day||Revenue|
|Crude Oil(in barrels)||Natural Gas(in cubic meter)||(Crude Oil-20% & Natural Gas-10%)Dead Rent, PEL fee, etc.||CST/VAT(Crude Oil-2% & Natural Gas-5%)||Total(in crores)|
|2010-11||1.25 lac||9.0 lacs||1630 crores||228 crores||Rs. 1858.28 croces|
|2011-12||1.25-1.50 lacs||9.5 lacs||3435.61 crores||473.29 crores||Rs. 3908.9 croces|
|2012-13||1.75 lac||10.5 lacs||5069.88 crores||666.57 crores||5736.45 croces|
|2013-14||1.75-1.90 lac||12.5||5953.11 crores||760.11 crores||6713.22 crores|
|2014-15||1.75-2.00 lac||18.00 lacs||4848.70 crores||–||4848.70 crores|
|2015-16||1.65-1.70 lac||20-21 lacs||2341.43 crores||–||2341.43 crores|
It is clear from above table that starting with Rs 1858 crores revenue in 2010-11, the graph increased to 6713 crores in 2013-14, but then there is steep fall in revenue resulting in 2341 crores by 2015-16 which is almost one third or 33% of what state was getting two years back. Or say the loss has been progressive loss from 13-14 to 14-15 is 1865 crores, then 2507 crores from 14-15 to 15-16. The cumulative loss from 2013-14 to 2014-15 is 4372 crores of rupees, definitely not a small amount. And there is going to be a further decline in 2016-17. And just to remind readers that production has not decreased by a single barrel, on the contrary it has increased. Due to falling prices, Cairn India has kept on hold its new exploration programme of drilling about 100 new wells as oil drilling incurs an expenditure of Rs 3 crore/day per rig. Even other companies in western Rajasthan are giving second thought to their own exploration programmes.Some are even thinking of winding up their operations.
This loss to state govt. has mult-ifold ramifications too. Looking to the continuous supply of oil revenues, the previous Congress govt. had initiated many social security schemes for poor like pension, free medicines, free check up of animals in veterinary hospitals. But revenue loss has raised concerns for govt. in corridors of power as to how money for social security schemes shall be generated now as it is putting additional burden on state budget.
Above paragraphs have clearly explained that falling crude prices, apart from savings also affect revenues to different governments. The revenue loss from Rajasthan oil fields is Rs 2000 crore/year, if calculations for all the Indian oil fields is made then this figure would be approximately Rs 15000-20000 crores/year for the entire country.
By Rakesh Goswami