TATA Sasol JV against profit sharing in CTL projects

PTI reported that the TATA group and its South African partner Sasol have opposed giving part of the crude oil they plan to produce from coal to the government as profit share.

Strategic Energy Technology Systems Ltd, a JV of TATA Sons and Sasol, vying for the coal to liquid project has told the government that profit sharing would effectively be a new tax, which is not permissible under relevant Acts.

SETSL has, however, opposed the regime in the project saying that the Oilfield Regulation Act or the Petroleum and Natural Gas Rules do not apply if crude oil and gas produced from coal are synthetic and not naturally occurring hydrocarbon.

It said that "Therefore, if a new tax in the form of profit sharing on CTL products is to be allowed, this can be done only through a legislative measure with the approval of Parliament. This cannot be done through an executive order."

As per report, the India Government is considering replicating the production sharing regime in oil and gas in the ambitious project, which envisages producing crude oil up to 80,000 barrels per day. Instead of charging upfront payment or signature bonus for allocating natural resources, the Government gets a share of oil and gas produced called profit petroleum, which is biddable and can be taken in kind or cash.