PESHAWAR, Aug 1: Payment to the NWFP government on account of oil and gas royalty will surpass the budget estimates because of the expected growing production of oil and gas during the current fiscal year, officials said.

Officials of the finance department told Dawn that growing volume of oil and gas production was becoming a major source of income for the provincial government, which heavily depended on federal fiscal transfers.

The provincial government annually receives a handsome amount from the federal government on accounts of royalty on gas and crude oil, gas development surcharge and excise duty on gas.

At present, three oil and gas fields are operational in the province, located at Chanda (Shakardara-Kohat), Manzalai (Karak) and Makori (Karak). Regular production from Chanda fields started on July 17, 2004, Manzalai fields on Jan 31, 2005, and Makori in January 2006.

In financial year 2004-05, the provincial government received Rs487.271 million against these heads, whereas the volume of receipts in fiscal year 2005-06 climbed to Rs1.183 billion.

For financial year 2006-07, the government had estimated receipts on these accounts at Rs1.744 billion, but actual receipts were Rs2.225 billion.

The government has put the receipt estimates for this year at Rs2.251 billion which, according to the officials, would grow substantially by the end of the fiscal year, creating a fiscal space for the government to finance its development and operational activities.

According to the officials, royalty on oil and gas was presently payable by exploration and production companies to the government at the rate of 12.50 per cent of the well-head value under the Pakistan Exploration and Production Rules, 1986.

The officials said the provincial government anticipated greater flow of receipts in years to come mainly because exploration of oil and gas was in progress at an area of approximately 11,396 square kilometres in the province. Currently, four companies are engaged in the exploration work.