Roundtable demands allocation of 50% share of KG Basin gas to Andhra Pradesh
Citing the recommendations of the 12th Finance Commission, the participants urged Chief Minister Chandrababu Naidu to press the Centre for the State’s rightful share
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Context
A political roundtable in Andhra Pradesh has demanded that 50% of the natural gas from the Krishna-Godavari (KG) Basin be allocated to the state. This demand stems from the perception that while the state bears the environmental and social costs of offshore drilling, the economic benefits are disproportionately flowing to private corporations and other states, leading to local energy shortages.
UPSC Perspectives
Polity & Federalism
This issue is a classic example of resource federalism, which deals with the division of rights over natural resources between the Union and State governments. According to of the Constitution, minerals and other resources located in India's Exclusive Economic Zone (EEZ) and continental shelf are owned by the Union government. The governs the allocation of these resources, which was amended in 2023 to introduce auctions for granting operating rights. The demand from Andhra Pradesh, citing recommendations from the for a higher share for producing states, challenges the existing framework. While the 12th Finance Commission did have a chapter on 'Sharing of Profit Petroleum', its primary recommendations focused on tax devolution (30.5% to states) and grants-in-aid, not a specific 50% share of physical resources for producing states. This conflict highlights the tension between the Centre's constitutional authority and the states' aspirations for a greater share in the wealth generated from resources within their geographical proximity, especially when they bear the negative externalities of extraction.
Economic
The economic perspective revolves around the Production Sharing Contract (PSC) model and energy security. The KG-D6 block operates under the , which was designed to attract private and foreign investment in the hydrocarbon sector. Under NELP, contractors (like Reliance Industries) are given the freedom to market the gas in the domestic market, subject to government allocation policies. The roundtable's complaint is that gas is transported to industrial hubs in other states, while Andhra Pradesh faces shortages affecting households and small businesses. This raises questions about the efficiency and equity of the gas allocation policy. While designed to fuel national economic growth, the policy is perceived locally as extractive. The under-utilisation of gas-based power plants in the state due to supply constraints further underscores the economic cost of this policy framework. Global tensions affecting LNG supply, as mentioned in the article, amplify the need for a robust and equitable domestic allocation strategy to ensure national and regional energy security.
Environmental & Social
The environmental and social dimensions highlight the concept of negative externalities and the Polluter Pays Principle. The residents of coastal Andhra Pradesh bear the direct environmental and social costs of offshore drilling, including marine pollution, degradation of coastal ecosystems, and potential displacement of traditional livelihoods like fishing. These costs are not fully factored into the price of the extracted gas. The roundtable's argument is that if the state is bearing these ecological burdens, it should receive a commensurate share of the financial benefits. This aligns with the principles of environmental justice, which advocate for fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. The demand for a greater share can be seen as a form of compensation for the social and ecological damages incurred, which are often overlooked in contracts focused purely on economic output and revenue.