The federal government has no right whatsoever to deny the payment of oil royalties from Petronas to the Terengganu PAS government, according to an exco member.

"This agreement has nothing to do with the central government and has nothing that allows the latter's meddling to destroy the rights of the Terengganu government," said the chairman of the Terengganu Ombudsman Committee Mohd Salleh Abas in reference to Section 4 of the Petroleum Development Act 1974 and the agreement between the state government with Petronas on March 22, 1975.

As the then Attorney-General, Salleh was a key person in the drafting of the Act.

"This (interference) is against contract laws and the Federal Constitution," he said.

"Obviously, the Terengganu government has been denied its rights as it has yet to receive the petroleum production royalties payment from January to July 1 this year, which was due this September," added Salleh in a question-and-answer session with malaysiakini yesterday ([#1]Wawancara dengan Mohd Salleh Abas[/#], Oct 11).

He added that the Terengganu government did not know about the new method of payment that was to be done through the Central Development Committee (CDC). The only information it had on the matter was gleaned from a copy of a Ministry of Finance statement on Sept 5.

Transforming "royalties" into "goodwill payment" will not change the status of the payment in legal terms as the money still needs to be paid by Petronas and remains Terengganu's right, he added.

He also lambasted the central government for claiming that the royalties were given to Terengganu by the late former prime minister Tun Abdul Razak Hussein in 1974 due to it being supposedly the poorest state at the time.

"(The statement) does not make any sense," he said, adding that Tun Abdul Razak passed away on Jan 14, 1976, and it was only in the middle of that year that oil was discovered on the shores of Terengganu

"How could Tun Abdul Razak have ordered for the royalties to be paid to Terengganu when the oil on its shores was only discovered after he passed away?"

Also, the Act states that when oil is found in a state, it has to be surrendered to Petronas which, in turn, must pay the central and the state governments a cash sum that has been agreed upon.

"Maintaining the royalties payments to Sabah and Sarawak and yet stopping it to Terengganu is discriminatory," he said.

Appoint auditor to oversee expenses

Meanwhile, the federal government has been asked to send an auditor to Terengganu to oversee its state expenditure.

"The central government has the authority under Article 95 of the Federal Constitution to appoint its officers to audit state government accounts," said Salleh, offering the solution as a challenge to Prime Minister Dr Mahathir Mohamad's statement last month that the goodwill payment would keep the Terengganu state government from abusing the fund.

"But the central government did nothing of the sort (send an auditor) and straightaway accused the state government of misusing the fund. This clearly shows that the accusations are unfounded," he said.

The former Chief Justice of Malaysia, in turn, accused the previous BN state government of mismanaging the royalties.

"The money was spent wastefully, as if our petroleum sources would last forever," he said, adding that the state is still RM700 million in debt despite receiving RM7 billion in royalties since 1978.

Salleh also said that a great amount had already been spent by the previous BN state government on unnecessary ventures such as building high-rises and investing in problem-ridden companies. He cited as an example, the RM670 million that was poured into the controversial Perwaja steel venture which incurred RM3.5 billion in losses.

Another bail-out, of the now-defunct steel company Gunawan Iron and Steel, set the Terengganu state government back by a further RM453.6 million.

"Are these the sort of ventures that will relieve the people of Terengganu from poverty?" asked Salleh.