NEW DELHI: India’s oil ministry has ordered Reliance Industries Royal Dutch Shell and Oil & Natural Gas Corp to pay $3.8 billion as the increased share of the government’s earnings from the Panna-Mukta and Tapti fields after a UK court rejected challenges to the arbitration award that went against the companies, people familiar with the matter said.The liability is to be shared by the companies in proportion to their interests in the oil and gas fields in the Arabian Sea – ONGC (40%), RIL (30%) and Shell (30%). The demand was made a few days ago.Reliance and Shell separately said a demand for payment at this stage was premature because the arbitral tribunal is yet to determine the final outcome of the proceedings. Reliance and BG (taken over by Shell) had invoked arbitration against the government in December 2010 after a dispute over the state’s share of profit and royalty from Panna-Mukta and Mid and South Tapti contract areas off the west coast.The government said profit should be calculated after adding the marketing margins of the companies and that only the actual taxes paid could be counted as costs, not the notional rate mentioned in the contractThe government barred stateowned ONGC from the arbitration, although the outcome of the proceedings would apply to the exploration company as well.The arbitration tribunal had pronounced a ‘final partial award’ in October 2016, which went largely in favour of the government.The ministry of petroleum & natural gas then computed the liability of the three companies and directed them in May last year to pay the differential share of profit and royalty of $3.9 billion. The companies refused to pay, saying the award had been challenged in a UK court and the liability not yet been quantified by the tribunal.Reliance and Shell registered nine challenges to the award in court, which rejected all but one in its judgement last month. The government recomputed the liability and, citing the court’s verdict, sent a fresh demand notice of $3.8 billion this month, warning that interest will pile up if they don’t pay in time, according to two people with knowledge of the matter.“The English court delivered its judgment on April 16, 2018 and by its order dated May 2, 2018 decided to remit one of the challenged issues back to the arbitration tribunal for reconsideration.The arbitration tribunal has scheduled a hearing on the remitted issue and shall, thereafter, deliver the award,” a spokesperson for Reliance said in response to ET’s query.“The tribunal has to first decide the remitted issue and thereafter consider claimants’ applications for increase in cost recovery limit under the production sharing contracts. After these two issues are decided, the tribunal shall be scheduling the quantification phase of the arbitration to ascertain monetary liabilities, if any, of the parties.”“The arbitral process is still ongoing and is subject to confidentiality restrictions and any view on the outcome of this process including any potential payments by either of the parties are premature at this stage since further proceedings, including quantification, are yet to be concluded,” a spokesperson for Shell companies in India said.The oil ministry didn’t respond to ET’s query. ONGC said it is not party to the arbitration and the proceedings in the UK court and has no information on them or any awards or orders passed.The UK court upheld the tribunal’s view that profit from the fields should be calculated after deducting tax at 33%, not the notional 50% rate. It also agreed with the tribunal in saying that companies must include marketing margins in the sales price for computing the profit share and royalty due to the government. Other challenges that the court dismissed included those related to the limit on cost recovery and the withholding of payments by GAIL India and Indian Oil Corp for output from the fields.The challenge of the companies that succeeded related to their contention that the government had agreed to certain development costs that could be recovered fully, without restriction. The court noted that the tribunal had failed to address this, giving rise to ‘substantial injustice.’The production sharing contracts for the PMT fields were signed between the government and the contractor in December 1994 for 25 years.