Thursday, October 24

Royalty or profit sharing?


Dr Mahathir backtracked on his announcement on 20 per cent royalty by saying the payment will be based on profit

Dr Mahathir during a question and answer session at the Parliament yesterday. — Bernama photo

KUCHING: Prime Minister Tun Dr Mahathir Mohamad cast doubt over his own announcement in the Dewan Rakyat that Pakatan Harapan (PH) government will honour its promise of providing 20 per cent royalty to petroleum-producing states yesterday by saying to reporters the payment would be 20 percent of the profit when met later outside the Parliament building in Kuala Lumpur.

In answering a supplementary question from Siti Zailah Mohd Yusoff (PAS-Rantau Panjang) in the Dewan Rakyat earlier on oil royalty, he said there would be no deviation from PH’s promise of giving 20 per cent royalty to oil producing states in the country.

“But we hope that the royalty will be used for the good of these states and not misused to strengthen (political) parties and for other purposes,” Bernama quoted Dr Mahathir as saying.

The prime minister confirmed that Sarawak and Sabah would receive the 20 per cent royalty after Kapit MP Datuk Alexander Nanta Linggi sought confirmation from him if the two states would be included in the royalty payment.

However, he seemed to clarify his earlier statement later by saying that the 20 per cent payment will be based on profit instead of royalty.

“Everybody will get 20 per cent of the profit from their area. If their area produces a small amount, then they will have 20 per cent of profit from that area. But it is the profit,” Dr Mahathir told reporters.

Sabah and Sarawak are currently paid five per cent in royalty.

The Sarawak State Legislative Assembly in 2014 had unanimously voted in favour of a resolution to request the Federal Government for an increase in the oil royalty from five per cent to 20 per cent.

Pakatan Harapan (PH), in its 14th General Election manifesto had promised to increase royalties for all petroleum producing states to 20 per cent.

The oil producing states in Malaysia are Sarawak, Sabah, Kelantan and Terengganu.

Dr Mahathir’s flip flop on the royalty payment raised concern that Sarawak would be short-changed in its share of revenue from its oil and gas resources as 20 per cent profit will be less than 20 per cent royalty.

This is because royalty payment is based on the value of oil and gas extracted from the state while a share of the profit is based on the balance of that value after subtracting all the expenses incurred.

There is even a possibility that 20 per cent profit would be less than five per cent royalty.