KARACHI: The Sindh government has asked the federal government to stop collection of royalty on crude oil and allow provinces to collect the same under their own laws as a ‘constitutional residual subject’, it emerged on Tuesday.

Officials said the provincial government raised the issue at a recent meeting of the Council of Common Interests (CCI) in which Sindh Chief Minister Murad Ali Shah said the ‘ownership right’ of the provinces over mineral oil and natural gas had never been an issue.

“It had always been with the provinces. The constitution, since inception under Article 161 (1), recognises the ownership rights of the provinces over mineral oil and natural gas by transferring to them all the monies collected on account of royalty and federal excise duty,” said a document shared with the participants at the CCI meeting by the Sindh government.

Under the same article of the constitution, net proceeds of the royalty and federal excise duty are not part of the Federal Consolidated Fund and “shall be paid to the province in which the well head of oil and gas is located”, the document added.

“The federal government is only required to collect these monies on behalf of the provinces. The joint and equal vesting of oil and gas under Article 172 (3) has not altered the provisions of Article 161 whose scope has even been further expanded after the 18th Amendment.”

Officials said it was clear that Article 172 (3) read with Article 154 (1) and Article 161 (1) had redefined the extent of the jurisdiction of the federation in mineral oil and natural gas related matters.

“The federation is required to exercise the authority in executive, administrative and regulatory sphere jointly and equally with the provinces.”

Officials said the federation had been suggested to carry out certain measures, which included amendments in all laws, ordinance, presidential orders related to oil and gas in the light of Article 172 (3) especially the Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act 1948, Mines Act 1923, repeal of President Order No. 8 of 1961, etc. Besides, amendment in the Oilfield (Regulation and Development) Act 1969 has also been stressed.

The document added that implementation of Article 172(3) required complete overhaul of the existing laws, administration, management and regulatory regime related to mineral oil and natural gas.

The Sindh government also demanded drafting and enactment of a new Petroleum Joint Control Law with provisions for establishment of petroleum management authority by replacing or encompassing DGPC (director general petroleum concessions), DG Gas, DG Oil and DG LPG.

Other amendments demanded by Sindh include: upstream and downstream rules, policies, PCA, D&P Lease agreements, petroleum sharing agreements in the light of Article 172 etc; amendments in Ogra Ordinance 2002 for equal representation of provinces on the model of Nepra Act; due representation of provinces in the board of directors in Islamabad-owned oil and gas companies/entities such as OGDCL, PPL, PSO, Government Holding Pvt Ltd, oil refineries etc; relevant laws, rules, regulations on land reclamation, development of coastal regions, fishing rights and licensing regime [Article 172(2)]; and imposition, collection and disbursement of excise duty on crude oil [Article 161 (1)(b)].

Published in Dawn December 28th, 2016