A just demand

Andhra Pradesh Chief Minister N Chandrababu Naidu is perfectly justified when he says that the State deserves a share in the profit gas accruing to the Central government from the Krishna Godavari Basin. Naidu said in an exclusive interview to The Hans India that his government is in fact taking up with Prime Minister Narendra Modi this just grievance.

Unfortunately, the share in the KG Basin profit gas does not figure in any legislative or political discourse on either special status or special assistance or package to Andhra Pradesh which is struggling to come out of post-bifurcation blues. Chief Ministers of united Andhra Pradesh also wrote several letters to the Government of India seeking a share in the profit gas.

But the Centre did not yield to this request. The Legislative Council of the united State even passed a unanimous resolution, reiterating this request. Profit petroleum is in the nature of non-tax revenue receivable by the Central government out of the profit generated on account of production of crude oil and natural gas from the fields awarded by the government under a production sharing contract (PSC). The Central government becomes entitled to a share in profit if, in the event of commercial production, a project generates profit.

The States where mineral oil or gas is produced have obviously consented to the New Exploration and Licensing Policy (NELP) in the expectation that profit petroleum or profit gas would be shared. Indeed the 12th Finance Commission has stated that it would therefore be appropriate for the Central government to agree to a certain share in profit petroleum for the States in which the exploration blocks are offered under the NELP.

The KG basin is an offshore block of Andhra Pradesh and it is therefore entitled to the share in the profit gas from this basin. The Centre is unjustified if it makes onshore and offshore cleavage to deny the State of its share. The 12th Finance Commission has recommended a 50 per cent share in the profit petroleum. Natural gas being the feeder stock for a host of industrial applications and transport, Andhra Pradesh would immensely benefit from such a share. In fact, the State can attract, perhaps, more investments than it could due to the special status.

The State is justified in seeking a share as it incurs expenditure on development of infrastructure, provision of essential public services and even has to undergo environmental costs in order to facilitate oil and gas exploration and development.
The State of Andhra Pradesh has a rightful share of the profit petroleum whether it is produced within the State or in the contiguous high seas.

In fact, Narendra Modi-led Gujarat government in its submission to the 12th Finance Commission suggested that the Central government’s claims to future profit petroleum should be devolved to respective State governments. Thus, the NDA government should not have any objection to at least share the profit petroleum.

The NDA government, which now refuses to accord special category status to Andhra Pradesh despite a clear parliamentary assurance to this effect on the pretext of 14th Finance Commission recommending scrapping of the scheme of special category states, should implement the recommendations of 12th Finance Commission.