The Cabinet Committee on Economic Affairs deferred on Thursday a decision on sharing royalty earned from oil output with states.

"A decision on petroleum ministry's proposal to share equally with states, profit petroleum earned on crude oil production from blocks awarded under the New Exploration Licensing Policy, was deferred," official sources said in New Delhi.

This is the second time that petroleum ministry's proposal has been turned down, the first time being in July 2002.

Sources said the finance ministry was not agreeable to the new dispensation and was of the opinion that the sharing of central revenues with states should be strictly on the recommendations of the 12th Finance Commission.

Finance ministry had also pointed that the Centre would receive its first royalty in the form of profit petroleum only in 2012, when the tax holiday given to investors under the NELP expires.

The CCEA also deferred a decision to give states 55 per cent of production level profit and commercial discovery bonus from blocks awarded for exploitation of Coal Bed Methane.

The finance ministry has raised objections on the issue pointing that the issue should be considered in broad framework of revenue sharing scheme between the Centre and the state, sources said.

The states, particularly Gujarat, had been demanding 50 per cent share in profit petroleum that accrues to the Centre under the production sharing contract signed under NELP.