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One-upmanship over oil royalty

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  12 Feb 2016 12:00 AM GMT

Yet another round of blame game and passing the buck has begun between the NDA and the Tarun Gogoi government over the issue of outstanding oil royalty to Assam. With their eyes firmly on the assembly elections, both sides are out to score political points. Union minister of state for Petroleum and tural Gas Dharmendra Pradhan during his recent visit here said that the Assam government should have gone to court to seek royalty arrears. Rubbing it in further, he commented: ‘Injustice was done by the UPA government for underpayment of crude oil royalty to Assam’. Pradhan then referred to Gujarat which moved the Supreme Court and got a ruling in its favour. He also promised telling PSUs like ONGC and OIL ‘not to fight with Assam government in the court’. Cut to the quick, Tarun Gogoi hit back, asking why should the Assam government go to court spending public money to press for its legitimate demand. The Supreme Court order directing Gujarat to be paid oil royalty at updated rate should apply to Assam as well, the Chief Minister argued. While an issue like royalty from a tural resource should not be hostage to partisan politics, this is precisely what is happening here. The NDA is taking the opportunity to again hit the Tarun Gogoi government where it hurts. After all, back in 2011, the then rendra Modi-led Gujarat government petitioned the Gujarat High Court — demanding payment of crude oil royalty at market rate, with arrears totalling around Rs 10,000 crore. The Congress-led UPA was then ruling the Centre, so what the Modi government did, the Tarun Gogoi government simply did not dare to do.

According to the Oil Field Act, oil exploring companies are required to pay 20 per cent royalty on price of crude oil drilled from on-land oil blocks to the respective State governments. In 2004, the Union government asked such PSUs to provide crude to oil marketing companies at discounted prices as part of a burden-sharing mechanism. The move was to help make up part of the huge losses oil marketers were suffering by selling diesel, cooking gas and kerosene at government controlled rates. Since then, ONGC started paying royalty on the basis of discounted price as fixed by the Ministry Petroleum & tural Gas. However, the oil producing states cited huge losses due to this arrangement; so they began demanding royalty on well head price determined on the basis of prevailing intertiol crude price. After complaining to the Centre to no avail, the Gujarat government secured a ruling from the Gujarat High Court in 2013 — which directed the ONGC to pay royalty, to the State government at market rate (gross billing price). The ONGC, however, baulked at being asked to pay past royalty dues to the tune of Rs 10,000 crore, arguing it could not pay the levy on a price it had not realised. So the matter reached the Supreme Court, which in its interim order, directed ONGC to pay royalty to Gujarat on pre-discounted crude price, beginning February 1, 2014.

Assam also took the stand that with the Centre allowing ONGC and OIL to sell crude to oil marketing companies at price discounts as high as 90 percent or more, and then mandating that States be paid royalty on the basis of such heavily subsidised prices — the cumulative revenue loss suffered by the State is more than Rs 10,000 crore since 2008-09. After adding VAT at 5 percent and other State taxes at pre-discounted price, the dues would be even larger. But the Tarun Gogoi government got around to move the Gauhati High Court only late in 2014, some months after the rendra Modi-led BJP stormed back to power at the Centre. The question is — when the Gujarat government could take a firm stand against oil exploring PSUs in court way back in 2011 and wrest its justified share of oil revenue, what prevented the Tarun Gogoi government from taking an equally principled stand then? After all, it is not the Central government that pays oil royalty to the producer States, it is the oil exploring PSUs that do so. It was not as if the Congress government of Assam needed to drag the Congress government at the Centre to court demanding royalty dues! When rendra Modi as Prime Minister visited Assam in November 2014, that was when the Chief Minister forcefully pleaded the issue that ‘a special category state like Assam cannot afford such a huge loss of revenue’ due from oil royalty. Nothing worthwhile can be obtained without fighting for it. The Tarun Gogoi government has now woken up to the need for fighting for oil royalty with a different political dispensation at the Centre. It is now demanding the same fruits for Assam as Gujarat is getting, glossing over the fact that the Gujarat government fought for the legitimate interests of the State over four years back. Fortune favours the brave, and sadly, this is where the Assam government has been found wanting. Covering up that failure with political rhetoric and one-upmanship will just not do.

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