The Terengganu state government will be filing a suit pertaining to the oil royalty issue early next month, said a state executive council member.

Mustafa Ali, the exco of Development, Economy, Petroleum and Industry and Human Resources, today said that the case will be brought to the Kuala Lumpur High Court.

He said that the state government would be the plaintiff and that details of the defendants and lawyers will be disclosed later. It is expected that the defendants will include the federal government and national oil company Petronas.

Under the Petroleum Development Act 1975, Terengganu was to be given an annual five percent royalty by Petronas.

However, last year, Prime Minister Dr Mahathir Mohamad claimed that the payment was not royalty but a "goodwill" payment made to the state in consideration of its economic backwardness.

While the first payment of RM432 million of last year's royalty had been paid to the state last February, the second half of the total of RM810 million, which was scheduled to be paid last August was withheld by the federal government and channelled to a special fund controlled by a committee under the Finance Ministry.

This has prompted the state government's decision last Oct 31 to take legal action on the matter.

New income sources

In December last year, Terengganu Mentri Besar Hadi Awang mentioned in his budget speech that RM700 million has been taken away from the state by the federal government.

Hadi further announced that the estimated income of the state in 2001 amounted to RM720.5 million, including RM540 million from the petroleum royalty, while the expenditure was estimated at RM733 million.

Asked how the state government will survive without the income from the oil royalty, which makes up the 75 percent of the state's revenue, Mustafa said the state is surviving thus far and exploring new sources of income such as increasing the premium on logging.

"Administration-wise, we can manage. It's only the big development projects that need more funds," Mustafa said.

As for the "goodwill" payment that had been channelled to the village safety and development committee (Jawatankuasa Keselamatan dan Kemajuan Kampung, JKKK), he said the government has no knowledge of it.

Previous stories