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State-owned oil and gas explorer, Oil and Natural Gas Corporation Ltd (ONGC), has been ordered to pay arrears of ₹173.69 crore to Mumbai Port Trust as wharfage compensation for the transportation of crude oil through two pipelines it had laid within the limits of the state-run port.
The wharfage compensation payable by ONGC according to a 28 January 2005 agreement signed with Mumbai Port Trust was approved by the Tariff Authority for Major Ports or TAMP, the rate regulator for major ports such as Mumbai, with retrospective effect on a proposal filed by Mumbai Port Trust.
“ONGC shall pay to the Mumbai Port Trust a compensation at one half (1/2) of wharfage rate as applicable on the per tonne of crude oil which will be imported into the Port of Mumbai through all or any of these ONGC pipelines and which will not be exported through the Mumbai Port Trust marine oil terminal, Jawahar Dweep or through any other existing and future oil, gas or chemical terminals of the Port,” TAMP wrote in its 03 October order.
The TAMP order settles a long-running dispute between two state-run firms over wharfage levied on the two pipelines, each stretching 19.5 km, within Mumbai Port Trust limits.
The Mumbai Port Trust said that as per the terms and conditions of the agreement entered between ONGC and MBPT, ONGC has committed to pay wharfage compensation to the Port Trust.
ONGC paid the wharfage compensation charges till fiscal year 2014, but discontinued payment from then on citing that such a levy, apart from being “unreasonable”, did not have the sanction of the rate regulator for major ports and hence, Mumbai Port Trust was “not authorized to levy compensation on ONGC”, according to documents reviewed by BusinessLine .
ONGC further contented that Section 38 of the Major Port Trusts Act, 1963, is applicable for sea going vessels for goods and passengers, whereas, crude oil is transported from Mumbai High field to Uran plant by pipelines and it is not brought to the Port and the Port Trust has not created any facility for receipt of crude oil from offshore fields of ONGC. The oil explorer also argued that it signed the 2005 agreement with Mumbai Port Trust “under duress and without full consent.”
“But, the ONGC was not obliged to accept such agreement if it did not want to. The intention of Mumbai Port Trust to levy the wharfage compensation charge was known to the ONGC way back in 2003 itself,” the TAMP order read. “Having signed the agreement, the ONGC cannot, at this stage, argue that it signed the agreement under duress and without consent,” it said
“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 MBPT, as a responsible public authority, has chosen not to rescind the agreement,’ TAMP wrote in its order.
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