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This is the second such criticism that the government has reneged on its agreements, the first being for its 20-year-long refusal to allow Communist Party of Malaya chief Chin Peng from returning home under the Hatyai peace accord signed on Dec 2, 1989. The 85-year-old has sued to return home but the courts have ruled against him while the government said it can't forgive him for his war against the state that killed thousands.

The DAP has criticised the ruling Barisan Nasional for the Chin Peng snub, while its Pakatan Rakyat ally, PAS which has ruled Kelantan since 1990, has asked the Gua Musang MP to head a caucus to press for Kelantan to get the oil royalty for oil and gas extracted off its shores. Tengku Razaleigh has yet to decide but his party leaders have cautioned him against doing so.

Prime Minister Datuk Seri Najib Razak has said Putrajaya will only offer "compassionate payment" through the Federal Office as the north-eastern state is not eligible for oil royalty because the fossil fuel is extracted beyond the three nautical mile state limits. It had changed the oil royalty to a similar payment for Terengganu when the state fell to the opposition in the 1999 general election.

However, both Sabah and Sarawak get oil royalty as guaranteed under the Petroleum Development Act 1974 which Tengku Razaleigh had drafted.

"I helped craft and negotiate the Petroleum Development Act. As chairman of Petronas, I signed separate and identical agreements in respect of these payments with each of the mentris besar of the states.

"I must insist that Petronas is bound by them and that the federal government should not interfere in their fulfilment," said the politician popularly known as Ku Li.

He noted that the government's response "violates the letter and the intent of a solemn agreement signed between each state government and Petronas under the Petroleum Development Act which is written in plain language that even schoolchildren can understand.

"The constitutional rights of the people of Kelantan are denied. However this has implications far beyond Kelantan," he said.

Tengku Razaleigh said Putrajaya's refusal negates an agreement signed between the Kelantan government and Petronas and "by implication, it negates identical agreements signed by Petronas with every other state and deprives the people of their constitutional rights".

"The government's refusal to recognise a straightforward contractual obligation on Petronas's part puts a question mark over the status of oil payments due to the other oil-producing states," he said.

"The states' rights to 5 per cent of profit derived from the extraction of any petroleum resources is based on a quid pro quo according to which the states vested entirely and in perpetuity all their rights and claims to petroleum resources to Petronas.

"In return for this Petronas is legally bound to pay the states the 5 per cent directly," he added.

The former Semangat 46 chief said the state oil firm's recalcitrance to pay under the law will make the states particularly Sabah and Sarawak "now wonder if the corresponding Vesting Deed by which they vested all their rights in their petroleum resources to Petronas remains in force" as the government's response was to replace Petronas's legal obligations under the Petroleum Development Act with an arbitrary "compassionate payment" from Putrajaya.

Oil and gas is extracted in the waters off Kelantan, Terengganu, Sabah and Sarawak. The discovery of fossil fuels off the Malay peninsula in the 1970s helped fuel economic growth but critics say the government is spending the petro-ringgit rather than salting it away.

The four states are also among the poorest in the country but Petronas has used its cash pile to build its iconic Petronas Twin Towers headquarters and the Putrajaya administrative capital apart from contributing some 40 per cent of the annual operating expenditure under the Budget.

The oil and gas fields off Kelantan waters are in a jointly-disputed area and is being developed together with Thailand.