Exclusive extracts from a new book on the KG Basin gas controversy reveals for the first time the views of two key players well acquainted, through first-hand knowledge, with Reliance’s moves on the pricing and use of natural gas
Gas Wars: Crony Capitalism And The Ambanis
By By Paranjoy Guha Thakurta with Subir Ghosh and Jyotirmoy Chaudhuri
Published by Paranjoy Guha Thakurta (www.gaswars.in) | Pages: 588 | Rs. 695
Former chairman of ONGC, 2001-06
When Raha met the lead author of this book on September 17, 2009, the cancer in his lungs was spreading. His hair had thinned after several rounds of chemotherapy. Still, he was remarkably alert. His words poured out in torrents; he was crystal clear about his convictions and his conclusions. He imposed only one condition before he started talking—he wanted to go through and vet the detailed transcript of the interview before a single word attributed to him was published. The transcript was sent to him, but he never got back. On February 1, 2010, Subir Raha passed away. He was 62.
In the first round of bidding under the new policy, that is, NELP-I, the Reliance group emerged as the winner in most blocks. In an open and transparent bidding process, ONGC lost out to Reliance in the race for a number of blocks. Raha said he had heard that secret information about the ONGC bids had been leaked out, though he could not independently confirm who had done this and for whom. “My guess is as good as yours,” he remarked.
The D6 block in the KG basin had gone to Reliance in 2000. Bidding was done by companies on the basis of certain databases. All investors had access to the same data, thereby offering a level playing field to all. However, additional data could be informally sourced from other companies that were already involved in the business of oil and natural gas exploration. Raha recounted a story he had heard about how data was sourced by Reliance for the KG basin before the company placed its bid. According to this story, Anil Ambani, who was still with his elder brother Mukesh, visited a retired ONGC official in Hyderabad to obtain more knowledge about the KG fields that his company wanted to acquire. The gentlemanly officer unpacked a few old papers from a rusty iron trunk and these documents apparently provided them with crucial clues about the reserves of oil and natural gas that lay beneath the bed of the Bay of Bengal.
This is where the issue of the PSC (Production Sharing Contract) crops up all over again. Raha said the responsibility for the controversy over KG gas rests squarely with the mopng. The ministry is the custodian of the NELP (New Exploration Licensing Policy) and the contracts that flow from the policy, and if the ministry had truly abided by the NELP and the PSCS signed in letter and in spirit, legal disputes could easily have been avoided, he argued. What Raha suggested, though not in so many words, was that the problems over pricing and allocation of KG gas was created because the mopng and the government of India through the EGOM headed by Pranab Mukherjee, directly or indirectly, sought to benefit one private party, in this case, RIL.
Petroleum minister, 2004-06
More than two years and eight months after he was suddenly and ignominiously removed, Mani Shankar Aiyar gave an extraordinarily detailed and hard-hitting speech about the controversy relating to the pricing and allotment of natural gas from the Krishna-Godavari basin. He referred to the tussle between the Ambani siblings and left nobody in doubt that the government’s role in the entire episode was questionable, if not downright dubious.
On 26 September 2009, Aiyar, known for his gift of the gab, was at his wittiest best speaking to a small group behind closed doors. For instance, when he referred to how the price of gas had been increased by the EGOM from $2.34 per mBtu to $4.20 per mBtu, he quipped, tongue in cheek, on the number 420; for the uninitiated, Section 420 of the Indian Penal Code relates to cheating and fraud, and provides for punishment of the convicted.
Aiyar’s speech was delivered shortly after noon (the meeting was conducted under the aegis of the ‘Saturday Lunch Club’ in New Delhi’s India International Centre). An interesting aspect of the speeches made at the Saturday Lunch Club is that these are largely governed by the ‘Chatham House’ rule that ensures confidentiality of the source of information received at a meeting.
Aiyar said that while earlier PSCS provided that the government reserved to itself the right to refer pricing issues to the proposed Petroleum and Natural Gas Regulatory Board when no such board existed:
“Now that such a board has been constituted, the new PSC drops all reference to the board and essentially reserves to the government the right to unilaterally decide all matters pertaining to pricing. Does this constitute a reversal of reforms? More to the point, will this discourage future private sector investors from entering the Indian petroleum exploration and development market?.... Also, should government interventions be aimed at raising prices for sellers or at keeping prices down for consumers? This appears to be the first case of a government fiat, resulting in consumers being asked to pay more for an essential commodity than might have been available from price indications in the marketplace.”