ISLAMABAD, Nov 12: The Parliamentary Committee on Balochistan has recommended empowering the provinces to sign petroleum exploration and sale agreements with local and foreign firms and substantially increasing the royalty they get on oil and gas, Dawn has learnt.

These are two key proposals of a six-point package drawn up initially by the ruling Pakistan Muslim League and later adopted by the parliamentary committee, a senior government official told Dawn.

The committee is of the view that a substantial increase in the rate of royalty on oil and gas would encourage regional political leaders to open up their provinces to petroleum exploration and development activities.

Similarly, it believes that empowering the provincial authorities to sign petroleum exploration and sale agreements with local and foreign firms would give the provinces a sense of ownership and make them directly responsible for the security of petroleum installations.

The proposals, along with the opinion of relevant federal ministries, would be presented to President General Pervez Musharraf soon for a decision. They aim at bringing regional political groups into the mainstream to achieve the twin objective of political reconciliation and opening up of petroleum blocks for the country's economic uplift.

However, the bureaucracy is said to have given a lukewarm response to the proposals. Firstly, the Ministries of Finance and Petroleum and Natural Resources have opposed increasing the rate of royalty on the ground that it was more or The provinces are currently being paid about one-eighth (12.5 per cent) of the total oil and gas sales price. Other countries are also paying almost the same share to their oil and gas producing states and provinces, they have argued.

The amount of royalty is automatically increased with the rise in oil and gas prices which are linked with the international market price. The amount, which was just Rs4-6 billion per annum a couple of years ago, has now increased to over Rs21 billion, the ministries have pointed out.

In particular, the gas prices of Sui field in Balochistan are envisaged to increase manifold as a result of dismantling of its old gas sales formula. The province's current share in gas royalty of about Rs8 billion per annum is likely to increase further if an agreement is reached between Sindh and Balochistan on the question of gas development surcharge.

Secondly, the provincial governments cannot be allowed to sign petroleum agreements with private firms because petroleum is purely a federal subject under the Constitution and yields over Rs70 billion per year in taxes to the national exchequer.

Moreover, the federal ministries are of the opinion that if one item of the federal domain is excluded from the federal consolidated list to the benefit of any province, it would lead to the opening of Pandora's Box.

The government is not willing to move on to the next stage of devolution of power, particularly those relating to fiscal empowerment of the provinces at present, according to the sources.

Over a dozen oil and gas exploration blocks had been awarded to over 20 local (both public and private) and international firms in Balochistan over the past 10 years but they could not start operations due to security and law and order problems and resistance from tribal leaders.