Oil and Natural Gas Corporation Ltd (ONGC), weighed down by the government-directed acquisition of HPCL in 2018, is piling up further agony after the rate regulator for major port trusts approved a proposal brought by the Mumbai Port Trust to levy special way leave fees on ONGC pipelines passing through port limits and rent for a land parcel, including arrears of over Rs 2.20 billion.
The Tariff Authority for Major Ports (TAMP), the rate regulator for the 11 major port trusts, had separately ordered ONGC in October 2018 to pay arrears of Rs 1736.9 million to Mumbai Port Trust as wharfage compensation for transportation of crude oil and gas from the Mumbai High field to the Uran terminal through pipelines it had laid within the limits of the state-run port.
ONGC laid the pipelines for crude oil and gas evacuation from Mumbai High to the Uran plant in 1978. About 19.5 km of these pipelines pass through the limits of Mumbai Port Trust.
ONGC paid the special way leave fees and land rent to Mumbai Port Trust on 11 pipelines and one parcel of land at Jawahar Dweep till 2014, after which the payment was discontinued by the state-run oil explorer, citing the levy did not have the backing of TAMP. ONGC further said it would not make the payment till Mumbai Port Trust secured TAMP’s approval for the levy.
ONGC also contended that the pipelines are laid under the seabed and far off from operational areas of the port, thereby not impacting other developmental activities of the port. Besides, Mumbai Port Trust was not rendering any service to the pipelines. Hence, ONGC was of the view that the “Mumbai Port Trust should not levy any way leave charges on ONGC”.
“The way leave charge is a levy, levied for the use of the property of the port within the port limits. In the instant case, the way leave charge is for the pipelines of ONGC passing through the Mumbai Port Trust limits,” TAMP said in its order. Responding to ONGC’s grievance that it signed the agreement with Mumbai Port Trust under duress and without full consent, TAMP said that “ONGC was not obliged to accept such agreement if it did not want to”.
“Having signed the agreement, the ONGC cannot, at this stage, argue that it signed the agreement under duress and without consent. Agreement has been made between both the parties who have intended to bind together to serve the interest of both the parties. When a binding agreement is not honoured by one party to the agreement by non-performance, there is breach of agreement. The other party is discharged from its obligation under the agreement and it is entitled to rescind the agreement, which would affect the oil industry.
The Mumbai Port Trust, being a responsible public authority, has chosen not to rescind the agreement. The proposal of the Mumbai Port Trust for recovery of way leave charges and rent for the parcel of land at Jawahar Dweep leviable as per the agreement between ONGC and MBPT dated 28 January 2005 is approved with retrospective effect from 01 October 2009 to 30 September 2018, as proposed by Mumbai Port Trust,” TAMP wrote in a February 8 gazette notification. Business Line has reviewed a copy of the gazette notification.
For cash-strapped Mumbai Port Trust, the TAMP orders on wharfage compensation, special way leave charges and land rent on ONGC pipelines means a bonanza of more than Rs 4 billion in arrears alone.