The Cabinet on Tuesday approved the petroleum ministry's proposal for a 20 per cent royalty on domestic crude produced from both onland and offshore fields.

The ministry had suggested the royalty be raised from 18 per cent, as recommended by the Mauskar committee, to 20 per cent of the well-head price.

The Cabinet has also approved that the gradual convergence of royalty rates for onland blocks with the 12.5 per cent royalty applicable under the new exploration licensing policy should take place after an ‘indeterminate period' and not five years as recommended by the Mauskar committee.

The Mauskar committee had recommended a sliding royalty for domestic crude following the dismantling of the administered pricing mechanism in the petroleum sector from April 1, 2002.

The Cabinet decision comes as a shot in the arm for oil-producing states like Assam and Gujarat.

However, the decision falls far short of their demand for a 40 per cent royalty.

The Mauskar committee had also suggested that for crude produced from onland areas, royalty may be paid at the rate of 18 per cent for 2002-03, followed by sliding rates of 1 per cent every year till 2006-07 and 1.5 per cent in the subsequent year to ultimately converge with the 12.5 per cent rate applicable under NELP in 2007-08.