Why the Rs 1,450 Crore Paid to Assam as Pending Oil Royalty Means Little to the State

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The amount is only a small part of the Rs 10,000 crore sought by chief minister Sarbananda Sonowal from the Centre to meet the committed liabilities that he inherited from the Gogoi government.

Assam finance minister Himanta Biswa Sarma, chief minister Sarbananda Sonowal, ONGC chairman Dinesh Sarraf, petroleum minister Dharmendra Pradhan and railways minister Rajen Gohain at Assam Bhawan on Thursday. Credit: Facebook

Assam finance minister Himanta Biswa Sarma, chief minister Sarbananda Sonowal, ONGC chairman Dinesh Sarraf, petroleum minister Dharmendra Pradhan and railways minister Rajen Gohain at Assam Bhawan on Thursday. Credit: Facebook

New Delhi: The BJP came to power in Assam with the promise of ushering in poriborton (change) after 15 years of Congress rule in the northeastern state. It goes without saying that the people of the state have high expectations from the Sarbananda Sonowal-led government.

On Thursday, the party’s government at the Centre gave a taste of the promised poriborton when state-owned oil producers Oil India Ltd. (OIL) and Oil and Natural Gas Corp. (ONGC) Ltd. paid the Assam government a total of Rs 1,450 crore as royalty dues on crude oil mined in the state.

The handing over of the funds – Rs 1,149.24 crore from OIL and Rs 300.64 from ONGC – at New Delhi’s Assam Bhawan was marked by symbolism.

Petroleum minister Dharmendra Pradhan, who was present at the event, said, “The chief minister said he will come to meet me at my office in Shastri Bhawan, but I told him I will come to Assam Bhawan to give it, as it is the right of the Assamese people. People have right over their natural resources. It is their money.”

Both Sonowal and the state finance minister Himanta Biswa Sarma, who were present at the event held at Assam Bhawan, responded to Pradhan’s gesture by heaping praises on Prime Minister Narendra Modi for his “generosity and kindness” towards the people of Assam for handing over the dues “at a time when most of Assam is under water”.

Aaj Modiji ne Dharmedraji ko Assam Bhawan bhej kar sab ke dil me anand jagaya (By sending Dharmendraji to Assam Bhawan, Modiji made everyone very happy),” Sonowal said, while addressing the media and others at the event.

There is however a subtext to this overjoy. Oil in Assam is widely looked at as a natural resource over which the people have an inherent right. Presently, the state government is facing backlash from organisations such as the All Assam Students Union, the Asom Jatiyatabadi Yuva Chatra Parishad and the Krishak Mukti Sangram Samiti on the Centre’s decision to privatise 12 oil fields in the state. The fact that the Centre has even failed to pay the state from 2008 onwards the oil royalty based on a pre-discounted rate, has also fuelled the backlash.

Thus, the state government being able to get funds from the Centre under the head of “pending oil royalty,” is therefore important to counter the agitation.

However, a closer look at the Centre’s gesture makes it seem more like an public relations exercise for the Modi government rather than being anything substantial that can help lift the state from the financial doldrums it is in at present. Add to it the devastating floods, thanks to which there is an urgent need for funds for the rehabilitation of the victims and for reconstruction work. And the picture goes from bad to worse.

In May, the Sonowal government took over the reign of Assam from the Tarun Gogoi government, which had run the state on a multi-crore deficit budget.

On his maiden trip to New Delhi in June as the chief minister, Sonowal met Modi and asked for an overall sum of Rs 26,226 crore.

According to news reports, Sonowal sought Rs 10,000 crore to meet the committed liabilities that he had inherited from the Gogoi government. Since the Centre owed Assam a crude oil royalty worth Rs 10,000 crore since 2008, he wanted the Centre to release the entire sum in order to address those committed liabilities.

In the meeting, which lasted for about half an hour, Sonowal, who had also submitted a white paper on the state’s financial condition to Modi, requested for an additional Rs 5,000 crore.

His request for the added fund was a “special one-time revenue deficit grant” to begin all the development projects mentioned in the BJP’s Vision Document launched in the run-up to the April assembly elections. It was based on the promised poriborton that the voters had chosen the party on. Sonowal will now obviously have to start delivering on them.

However, on Thursday, the Centre released only Rs 1,450 crore of the pending Rs 10,000 crore crude oil royalty.

Politics over oil royalty

Pradhan told the media that the Centre’s decision was in tandem with a 2014 Supreme Court interim order that was given in a case related to the Gujarat government, when the state had taken the Centre to court for paying it oil royalty on the post-discount price.

According to the ministry’s press release, “In view of the litigation arising out of the loss of royalty to state governments due to the discounts being provided by the ONGC and OIL to public sector oil marketing companies (OMCs) and interim decision of the Supreme court dated 13.02.14, the MoP&NG (The Ministry of Petroleum and Natural gas) vide letter dated 15.07.16 has decided that ONGC and OIL will pay royalty to all crude oil producing states at pre discount prices effective 01.02.14, pending the outcome of the SLA (Civil) No. 1596/2014 filed by ONGC Ltd. Before the Supreme Court.”

Pradhan said, “The Centre always wanted to give the money back to the people of Assam. I met Gogoi at his office in Guwahati in April 2015 and told him as much. I told him, ‘like the Gujarat government, the Assam government should also go to the court and we will release the money.’”

Although he expressed his doubts over the commitment of the Gogoi government in pursuing the case (in the Gauhati high court), he did not elaborate on why the same royalty amount that could be given to Assam now, was denied to it before when Gogoi had pointed out the Supreme Court order in a note to Modi at the end of 2014.

Obviously there was politics involved. Sarma did point at the “politics played over oil royalty” at the event, but held the UPA government responsible for it.

“The Manmohan Singh government’s decision in 2008 was to make the Gujarat state under Modi financially weak, but in the process he made Assam financially weak, a state he represented in the Rajya Sabha for 11 years. We wanted to move a censure motion against Singh, but had not done it keeping in mind that he is a former prime minister.”

Sarma was repeating what he had said in the assembly a few days ago, but why did he remain silent on the issue when he was himself a part of the Gogoi government back then?

In 2008-09, the Singh government had decided to pay oil royalty to all the state governments, including Assam, on the post-discount price of the crude oil which was realised by ONGC and OIL from the public sector OMCs.

Among the oil producing states, the one which openly took umbrage was Gujarat. In 2011, the state filed a petition before the Gujarat high court, seeking redress. It stated that the oil PSU ONGC should pay the state royalty at the market rate.

Though the Gujarat government received a favourable verdict from the high court, the Centre appealed against it in the Supreme Court. In February 2014, through an interim order, the apex court asked the Centre (ONGC) to pay the state the oil royalty at the pre-discount rate from February 2014 onwards. The apex court is still hearing the case on the pending oil royalty.

A long wait

So, when will Assam get the pending share from 2008 to 2013, which is crucial to meeting the state’s rising deficit?

Sarma, in reference to the ongoing Supreme Court case, said, “We will have to wait for the verdict, it will come soon.” He, however, did mention his government mounting some amount of pressure on the Centre to settle the issue out of court. To that, Pradhan added, “Take the present amount. We will see about the rest later. Let the verdict come.”

The Centre can ask the ONGC to withdraw the case and speed up the process, but such an intervention looks unlikely. ONGC chairman Dinesh Sarraf, who was present at the Assam Bhawan event, said, “We will have to retrospect on it.”

The Rs 26,226 crore that Sonowal sought from the Centre also included Rs 1,226 crore the Centre (the water resources ministry) owed the state under the flood management programme.

On Thursday, aside from meeting Pradhan, Sonowal made a visit to the water resources ministry to meet minister Sanjeev Balyan to not only remind him of the pending money but to also seek “a special grant from the Centre for flood and erosion management in the state”. Balyan however did not assure any funds.

The state government’s request to the Centre to declare the Assam floods a national disaster in order to ensure the flow of central funds for rehabilitation and reconstruction work has also not met with any response from the prime minister.

Meanwhile, Sarma presented a Rs 2,880.91 crore deficit budget in the state assembly on July 26 entailing the projects related to the BJP’s Vision Document in the hope of receiving funds from the central government.

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