The Nagaland government recently decided not to share any royalty on crude oil, natural gas and other minerals with the Centre according to an announcement made last Thursday. Nagaland Chief Minister Neiphiu Rio announced that a “new formula” was being worked out for the exploration and exploitation of oil, natural gas and other minerals. “We will take a few more weeks to give it a final shape. I can only say that it is a transparent formula approved by the people of Nagaland,” he said. There can be no doubt at all that this development is bound to whip up debate on the contentious issue of the Centre’s revenue sharing with the States.

According to the provisions of the Indian Constitution, crude oil, natural gas and all minerals and relics below the ground are the Centre’s property. As far as crude oil and natural gas are concerned, there has been a time-honoured policy of the Centre paying a royalty to the State where the crude oil or the natural gas is found. This is not to suggest that the royalties paid to the States have been fair. Not surprisingly, State governments have had to haggle with the Centre for higher royalties. However, what we have in Nagaland now is an entirely different cup of tea. The Nagaland government is saying in effect that there will be no revenue paid to the Centre and that all income from crude oil, natural gas and minerals will accrue entirely to the State. This stance is obviously based on the special status given to Nagaland under Article 371A of the Constitution. It is, however, important to bear in mind that the Constitution is silent on the matter of sharing of natural resources found in Nagaland with the Centre. It is clear, therefore, that Nagaland’s proposal to have a “new formula” for the exploration and exploitation of crude oil, natural gas, minerals and relics hinges on the unique mode of land ownership in that State. According to Nagaland’s customary laws, there is collective ownership of land. Article 371 A shows due respect to this particular customary law. Nagaland could, therefore, insist that this traditional mode of collective ownership would call for a different mode of dealing with what was below the land collectively owned.

Unfortunately, such new arrangements can only give rise to disputes stemming from discriminatory laws. Should such a different formula for Nagaland be conceded by the Centre, it is going to open a Pandora’s Box for the entire country. Thereafter, all State governments will begin to demand retention of the entire revenue from oil, natural gas and other minerals, without any sharing with the Centre. That is the kind of problem we run into when we have special provisions for different States of the Union or even a separate constitution as in the case of Jammu & Kashmir. Once a concession like this is agreed to in the case of one State, it would become extremely difficult for the Centre to cope with the avalanche of such demands from the other States of the Union. Even if the present level of royalty paid by the Centre to the States is inadequate or unfair, there is some wisdom in the Centre being allowed to retain a pivotal role in the exploration and exploitation of crude oil, natural gas and minerals below the ground. If the ownership of such resources is allowed to pass solely to the State government, there could be quite a few problems. Two of them are related to both capital and national security. Most of the Indian States are unlikely to be able to muster the kind of money needed for such exploration and exploitation. This problem would then be tackled by inviting foreign companies with the adequate resources and expertise to take on the task of exploration and exploitation. Most foreign companies would welcome such opportunities since they would have the additional benefit of providing a cover for espionage or diabolic political activities detrimental to national security. If India is to remain the Union of States that it is, it is imperative that it should have some participatory role in all such activities of exploration and exploitation of natural resources that constitute the wealth of the States as well as of the Centre.