After tabling record deficit Budget for 2024, Penang looks to royalty from oil and gas as possible revenue source

GEORGE TOWN, Nov 30 — The Penang government is keen to diversify its revenue sources after tabling the highest deficit Budget in state history for 2024.

Chief Minister Chow Kon Yeow said this includes the possibility of collecting royalty from high-quality oil and gas, even though Penang does not have the rights to tax petroleum products derived from state waters.

“We could look into other forms of revenue such as obtaining royalty. We can find ways to benefit from this,” he said in his winding-up speech at the Penang Legislative Assembly here today.

He said currently a multinational oil and gas company is conducting hydrocarbon seismic mapping involving high-quality oil and gas resources in the waters of Penang island.

“It is expected to be completed by the end of this year and the company conducting the study will present the findings to the Penang state exco then” he said.

Chow had last week tabled a RM1.047 billion state Budget for 2024 with a projected deficit of RM514.53 million.

Earlier today, he conceded it could be the highest deficit budget in the state’s history even as he highlighted Penang’s good economic development with its record of highest investments and good Gross Domestic Product (GDP) compared to other states.

“Our revenue is not enough to fulfil our commitment to bring balanced development to the state,” he said.

He said he had always raised this in meetings with the federal government and hoped that he would no longer be the lone voice stating this in such meetings.

He said other states also faced similar financial issues such as Kelantan, but added that Penang has been fortunate enough to have never reached a stage in which it could not pay the salaries of its civil servants.

“Penang does not have any new loans from the federal government and currently only owed RM40 million which we can pay in full even now but we will pay it according to schedule of RM4 million to RM5 million per year, so I would say our debts to the federal government is under control and probably the lowest compared to other states, some with debts up to the billions,” he said.

To replenish the state's depleting reserves, Chow said the state will boost its efforts to increase state revenue and reduce the amount of arrears.

“We will establish special task forces in each district to increase the collection of quit rent and to conduct quit rent reviews under Section 101 of the National Land Code,” he said.

The National Land Code is also known as Act 828.

Chow said another measure to increase state revenue is the reclassification of rural land to town land.

“Do you know that Bayan Baru is still classified as rural land even though it has been a satellite town for 40 years? But due to its classification as rural land, the land tariffs are lower,” he said.

He said lands in areas such as Relau, Paya Terubong, Bandar Baru Air Itam, Seberang Jaya and Tambun should also be reclassified.

“We completed this reclassification exercise two years ago but as a caring government, and maybe due to the state elections, we had postponed the implementation," he said.

He said the reclassification of the lands can bring in additional revenue of between RM20 million to RM30 million.

“However, there is a limit to getting more revenue from quit rent as this will burden the people so we have to do it responsibly,” he said.