The Ministry of Petroleum and Natural Gas is in favour of changing the cess on crude oil to an ad valorem based levy rather than fixed amount as is currently applicable.
However, the final decision will be with the Finance Ministry.
"We are in favour of an ad valorem based cess. It has been done for other minerals and it makes sense since we can get maximum benefit when crude oil prices are high and even when prices fall, the interests of the companies and the Government remains protected," a senior official of the Petroleum and Natural Gas Ministry said on Thursday.
The official added that a proposal is being prepared in the Ministry and after it is ready, it will be moved to the Finance Ministry. The official did not elaborate on the level of ad valorem cess it plans to propose.
Changing the structure to an ad valorem based levy has been a demand from Cairn India. In recent statements, Cairn India and its promoters have said that they are engaged with the Ministry of Petroleum and Natural Gas to bring in an ad valorem-based levy.