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Oil royalty for Assam

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  25 July 2016 12:00 AM GMT

The decks have now been cleared for Assam to receive some oil royalty outstanding for over two years, though the matter is pending in Supreme Court. The Union government recently ordered ONGC and OIL to pay royalty to oil producing states on the basis of gross price of crude oil. Since Gujarat has already wrested an interim benefit after knocking at court doors, it is now the turn of Assam and Andhra Pradesh to receive their part of dues. Assam stands to get around Rs 1,480 crore in two installments this year. State Fince minister Himanta Biswa Sarma while thanking the Modi government for this ‘timely help’ in preparing the State budget, also went hammer and tongs at his former party in the assembly. Alleging that the previous Manmohan Singh government ‘conspired’ to deprive Assam of its rightful share in royalty, Sarma also accused former Assam CM Tarun Gogoi of ‘collusion’. According to Sarma, while the Gujarat government fought for its rightful dues at court, the then Assam government did not — an obvious reference to the Congress ruling both the Centre and Assam at that time. “But once the NDA government came to power, Tarun Gogoi started raising the royalty issue and blaming the Centre,” alleged Sarma. A stung Congress has hit right back, arguing that since it believes in ‘cooperative federalism’, its government in Assam at first did not move the court. But after the Centre ‘failed to respond’ to Tarun Gogoi’s letter requesting Prime Minister Modi to persuade the ONGC to pay oil royalty to Assam at par with Gujarat, the Assam government had to petition Gauhati High Court.

Paying royalty to oil producing states should be an economic matter within clear-cut formula, but things are rarely that simple in this country. Any loophole or lacu is a sure invitation for politics to enter and muddy the waters thoroughly. Prior to 2004, the three oil producing states Assam, Gujarat and Andhra Pradesh used to get 20 percent royalty from PSU giants ONGC and OIL on the basis of well-head or gross price. Besides, the two PSUs also paid VAT at 5 per cent on sale of oil. But in 2004, the Centre decided that ONGC and OIL must help out loss-making oil refiners like IOC and HPCL through a burden sharing mechanism. Since the refiners had to sell diesel (till October 2014), kerosene and LPG at government controlled rates, they were under heavy pressure. Under the new system, ONGC and OIL were made to sell crude oil to the refiners at substantially discounted rates. Unhappy at being forced to offer this kind of subsidy, the ONGC has ever since complained of fall in net profits and hampered long-term growth. The oil producing states were unhappy too, as they were getting royalty on the basis of discounted prices offered by ONGC/OIL. An exasperated Gujarat petitioned the Gujarat High Court in 2011, demanding that the state should be paid royalty at gross or market rate, and that the losses of Rs 10,000 crore it had suffered since 2008 due to royalty paid at discounted rate, should be recompensed.

After the High Court ruled in Gujarat government’s favor in 2013, the ONGC challenged the ruling at the Supreme Court. Hearing the matter, the apex court has already passed an interim order directing ONGC to pay royalty to Gujarat at pre-discounted price beginning from February 1, 2014. It is a fact that the Tarun Gogoi government thought it fit to move the Gauhati High Court for similar relief much late in December 2014. For obvious political reasons, it did not make common cause with the then rendra Modi ruled Gujarat against its own government at the Centre. Once Modi was installed at the Centre as PM, Gogoi began his campaign to get Rs 10,000 crore royalty dues for Assam. In this political gamesmanship, the BJP has not been far behind either. After telling the Tarun Gogoi government earlier this year to ‘go to court’ to get its dues, the Union Petroleum minister said last month that the Centre ‘will support Assam’s stand in the legal procedure’. With Assam, Gujarat and Andhra Pradesh all under the NDA umbrella now, the Modi government can afford to be more generous. But surely, on an issue like oil revenues for produce states, such politics should have had no place. Now that the Gauhati High Court has ordered ONGC and OIL to pay oil royalty to Assam at pre-discounted price rate from February 1, 2014, the matter is on way to get straightened out. As for getting royalty at gross price in the period 2008 to 2014, Fince minister Sarma says Assam and Gujarat governments will jointly formulate their legal standpoints. That such coordition is considered possible only because the two states are being ruled by the same party, shows how the country’s economics is held hostage by its politics.

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