Collusion of political parties & RIL became manifest in unopposed re-election of Parimal Nathwani to Rajya Sabha
Who all are colluding to overprice the gas?
April 19, 2014: In a classic case of commencing a strategic lawsuit against public participation (SLAPP), legal notice has been served on the authors, publisher and distributor of the book "Gas Wars: Crony Capitalism and the Ambanis" by Reliance Industries Limited (RIL) and Mukesh D Ambani, the Chairman and Managing Director of RIL. This exercise is an assault on democratic rights. SLAPP is a lawsuit that is intended to censor, intimidate, and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition. This book which captures a historic moment of Indian economy has been authored by Paranjoy Guha Thakurta with co-authors.
The following excerpts from the 588 page book in question have been quoted in the legal notice:
· …Sections within the government of India, including the Office of the Comptroller and Auditor General (CAG) of India, a Constitutional authority mandated to oversee public finances, have been sharply crtical of the manner in which another wing of the government, the ministry of petroleum and natural gas (MoPNG), designed contracts and tailored rules to favour the country’s largest privately owned corporate conglomerate, Reliance Industries Limited (RIL), headed by India’s richest man Mukesh Ambani. (Preface page ix)
· Prime Minister Manmohan Singh has been accused of changing ministerial portfolios at the behest of the same corporate group, an allegation that RIL predictably denies. There have been claims that the group deliberately “squatted” on reserves of natural gas and curtailed production in anticipation of higher prices that are administered by the government, to the detriment of the interests of the country’s people…(Preface page ix)
· In October 2012, when Sudini Jaipal Reddy was removed from the post of Union minister of petroleum and natural gas and made minister for science and technology, opposition politicians alleged that he had been ‘kicked upstairs’ because he had refused to knowtow to the Ambanis. His ministry had claimed that RIL was ‘deliberately’ reducing gas output and exerting pressure on the government to increase the administered price of gas, charges the company denied. The ministry alleged that the fall in gas production had resulted in an estimated loss of $ 6.3 billion (or over 32, 000 crore at that time) to the country and sought to levy a penalty on the company. In June 2013, another Left MP Gurudas Dasgupta went hammer and tongs at Jaipal Reddy’s successor M. Veerappa Moily for over-ruling his own ministry’s bureaucrats as well as those of other ministries to prepare the ground for a hike in the government administered price of gas, describing the episode as a gigantic scam. Unfazed, later that month, a deeply divided Cabinet Committee on Economic Affairs decided to double the price of gas with effect from April 2014. This raised a hue and cry amid allegations that the government had gone out of its way to favour RIL. (Preface page xi)
· …The CAG report, tabled in Parliament in September 2011, did not quantify the losses to the state exchequer caused by RIL, but its insinuations were clear: the company had reaped huge profits thanks to the acts of commission and omission of a number of influential ministers and bureaucrats. The exchequer had been cheated because the government had failed to act as an impartial custodian of resources that belong to the people of India. (Preface page xi)
· This book is an attempt to unscramble and explain the entire series of controversies relating to KG gas and the battle between the Ambani brothers. It highlights cases of crony capitalism that allowed the RIL group to blatantly exploit loopholes that were consciously retained in the system. In doing so, it underlines instances of policies and procedures that were tailored to help increase the fortunes of a few. It points out how, even when laws and policies appeared fair, rational, and reasonable, the way in which these rules and procedures were framed and implemented by bureaucrats acting at the behest of their political masters resulted crony capitalism. (Preface page xii)
· This book inter alia seeks to lay bare the manner in which official contracts are structured in order to allow enough room for the government to be cheated of revenue and the country’s natural resources to be siphoned off with impunity. Indeed, the government’s role in the still-continuing KG basin epic is one among many instances of ruthless exploitation of natural resources in different parts of the country and the world. The pages that follow tell the story of how a corporate conglomerate, in this case India’s largest, was able to benefit from the way government policies were designed. In doing so, a pattern begins to appear, which epitomises the rise of the Ambanis over the years. (Preface page xii)
· If anyone nurtured any doubts…From January 1980 till October 1984, when Indira Gandhi was assassinated by her bodyguards, several government policies were ostensibly framed or ‘designed’ to help the Reliance group. (Page 26)
· The relationship between the Indian government and the Ambanis reflected new vistas of the intertwining of business and politics. The closed nature of the Indian economy at that time permitted the government to exercise control over economic activities…………….The state-the government of India led by representatives of the people-became relatively weak and often turned a blind eye as bureaucrats played favourites in disbursing business opportunities. In the days of the license raj, Dhirubhai Ambani, more than most of his fellow industrialists, understood the importance of ‘managing the environment’, a euphemism for keeping politicians and bureaucrats happy. He made no secret of the fact that he did not have an ego when it came to paying obeisance to government officials, whether secretaries to the government of India or lowly office attendents or peons. Dhirubhai did not subvert the process; he just made the best use of it. Even before began his industrial career, Indian politicians had been known to curry favour with businessmen. Licences and permits would be framed out in return for handsome donations during election campaigns. By the time the Reliance group’s fortunes were on the rise in the 1980s, the Indian economy had become more competitive. It was now insufficient for those in power to merely promote the interests of a particular business group; competitors too had to be shown their place. That is precisely what happened to rivals of the Ambanis, and this was an important new dimension to the nexus between business and politics. (Page 28)
· Few today remember a company called Swan Mills or, for that matter, Kapal Mehra, who headed a corporate group named Orkay, and who was raided by tax personnel and jailed. Another business rival of the Ambanis, Nusli Wadia of Bombay Dyeing, became a pale shadow of what he might have been had his entrepreneurial ambitions been fulfilled. Even the undivided family headed by the late Ram Nath Goenka, with its then control of the Indian Express chain of newspapers, which conducted a relentless campaign against the Reliance group in 1986-87, split into three factions after his death. (Page 29)
· A popular joke of the 1980s started with a question: Which is the most powerful political party in India? Answer: the Reliance Party of India. Dhirubhai’s supporters were not confined to those affiliated to the Congress (notwithstanding his proximity to Indira Gandhi), but cut across party lines. Few had the gumption to oppose the Ambanis, just as the overwhelming majority of journalists preferred not to be critical of Reliance. The Indian media, as a rule, lapped up whatever was doled out by the group’s public relations executives. The bureaucracy too, by and large, favoured the Ambanis, and not merely because many babus had got accustomed to receiving lavish hampers on Diwali. (Page 29)
· By then, the image of…The Reliance group was seen as one that had survived and prospered not through entrepreneurial acumen but as a result of political patronage. (Page 57)
· By then, the image of….The author of the Economist survey, Clive Crook, singled out the Reliance group for criticism. He wrote that the group symbolised all that was wrong with India, how the country’s corporate captains took advantage of favourable regulations to build monopolistic empires. The system smacked of nepotism and corruption. (Page 58)
· ….What Mukesh meant was that his late father had ‘resolved’ these ownership issues in his favour and that Mukesh was indeed the legitimate heir to Dhirubhai legacy….(Page 71)
· The battle over natural gas…Both brothers proved to be selfish, vengeful and greedy. It was a war without values. (Page 79)
· A deeply divided Cabinet is upset with the shenanigans of the Murli Deora controlled Petroleum and Natural Gas Ministry. Also known as Mukesh Ambani’s B Team in the capital. With stakes extremely high in their battle over gas, no stone is being left unturned by Mukesh Ambani and Murli Deora. But this has left senior ruling party politicians fuming for the blatant disregard of the rule of law to ensure that Mukesh Ambani gets his right of way. Forget younger brother Anil Ambani who is fighting him for the gas. Public Sector power utility NTPC (National Thermal Power Corporation) also be damned. NTPC has been waging a running battle with RIL, now lodged in the courts to get its share of KG Basin gas for its Kawas and Gandhar plants. But to no avail; a powerless power ministry has been tripped repeatedly by the all powerful Petroleum Ministry. With the government practically impleading itself in the Ambani gas row to protect Mukesh Ambani’s interests in the gas row, calling the family MoU as null and void in the matter, despite the honourable Maharashtra High Court ruling in favour of Anil Ambani owned Reliance Natural Resources, caution has now been thrown to the winds. (Page 93)
· There is yet another saying about the Ambanis: ’Once the enemy has been defeated, the victor appears generous-the loser invariably joins hands with his erstwhile adversary, even begging the latter to forgive and forget.’ This, in fact actually happened with many former rivals of the Reliance group, the most famous of them being Kapl Mehra (Orkay Mills). The Ambanis were certainly not unhappy when the Indian Express group, which had taken them on, got trifurcated after the death of Ram Nath Goenka in October 1991. (Page 96)
· In other words, what RIL was claiming was that it played strictly by the rules, It is, of course, a seprate matter altogether that the rules themselves were tweaked to favour the company. (Page 145)
· The Ambani brothers, Mukesh and Anil, had fought a pyrrhic war to control India’s natural gas resources. (Page 156)
· As we close this incomplete chronicle of how a single corporate conglomerate led by an oligarch fine tuned the art of crony capitalism in collusion with particular politicians and pliant bureaucrats. (Page 406)
The authors of the book ‘GAS WARS’ have responded saying, the book "has been more than fair providing versions of events, circumstances and controversies based on research made from various public documents, opinion of individuals available in the public domain, including media reports etc. The authors, being journalists, are exercising their right to free expression enshrined in Article 19(1)(a) of the Constitution of India."
The core issue that this scholarly and rigorously referenced book seems to be raising is: who all are colluding with RIL to deprive present and future generations of Indians of their claims of the natural resources of the country?
The collusion of political parties came to light in the unopposed re-election of Parimal Nathwani, Group President of Corporate Affairs at RIL to Rajya Sabha. Nathwani is a native of Gujarat, has been re-elected to the Rajya Sabha from Jharkhand. Four AJSU party MLAs and six BJP legislators proposed Nathwani’s name. He was elected to Rajya Sabha for the first time in March, 2008.
Take the case of pricing of the natural gas which has been made an electoral issue by AAP on which BJP, Congress and the regional parties are maintaining a deafening silence.
If gas price is low as per correct production rate then, why should Indians pay higher price of gas? Who wants Indians to pay price of Indian natural resource as per US price rate?
All mining resources belong to the people of India. In the case of oil and gas sector, government enters into contractual relationship with the private player through a Production Sharing Contract that specifies the cost recovery and profit sharing. Government’s Directorate General of Hydrocarbon monitors the execution of the contract. The production sharing contract reads, “By virtue of article 297 of the Constitution of India, Petroleum is a natural state in the territorial waters and the continental shelf of India is vested with the Union of India.” The Supreme Court has ruled, ‘the government owns the gas till it reaches its ultimate consumer and parties must restrict their negotiation within the conditions of the government policy.’
A letter dated January 20, 2014 written by Tapan Ray, Managing Director, Gujarat State Petroleum Corporation Ltd (GSPCL), a Government of Gujarat Undertaking to Vivek Rae, Secretary, Union Ministry of Petroleum and Natural Gas, Government of India has come to light suggesting a formula which will make the cost price of gas reach $14, which is quite higher than what the Indian National Congress led Government at the center has recommended. The letter seeks “approval of Gas price formula for gas to be produced from Deen Dayal West (DDW) Gas Field.” The letter dated April 02, 2013 reads, “As per bids received during E-auction, the clearing value of the biddable component was discovered as 0 (Zero). The equivalent gas price at V=0 and Brent Cride Oil Price of 110 US $/bbl is 14.20 US $/mmbtu (on GCV basis).” mmbtu stands for million British thermal unit. The letter dated January 20, 2014 reads, “GSPCL requests the Government to accord its approval for the sale of DDW Gas as per the Gas Price Formula proposed in the referred letter dated April 02, 2013.” Tapan Ray’s letter refers to his earlier letters dated April 02, 2013, June 10, 2013 and November 20, 2013 in this regard.
The April 02, 2013 letter states, State Petroleum Corporation Ltd (GSPCL), Jubilant Offshore Drilling Pvt Ltd (JODPL) and GeoGlobal Resources (India) Inc (GGR) signed a Production Sharing Contract (PSC) on February 4, 2003 with Government of India under NELP-III for Block KG-OSN-2001/3 located on East Coast of India. As per PSC signed with Government of India, GSPCL is designated as the Operator to carry out all exploration and development activities in KG-OSN-2001/3 block. GSPCL has achieved significant progress in development of Deen Dayal West (DDW) field in the KG-OSN-2001/3 block.”
This letter states that a process of price discovery through E-auction was carried out for which Expression of Interest was published in The Times of India-All India Edition, Business Standards- All India Edition, Hindustan Times-North India Edition, Business Line-South India Edition) for the price discovery of DDW gas through E-auction.
The letter reveals that “the e-aution was developed by Pandit Deendayal Petroleum University (PDPU) and M/s Guj Info Petro Ltd (GIPL).” The entire process of the E-auction was verified by the Independent Auditor (KPMG).
To get a grasp of what is going on in simple words, let us say one has a oil well at one’s backyard and one hires a contractor to pump the water out of it and there is a broker in between. The contractor agrees that they will charge 10 paisa on every 100 litres (as it was long term contract so this was the price negotiated). After some years (not even completed 20% of the contract duration, contractor came back and said increase the price, the broker involved said refused to dos so. The contractor bribed the broker and his associates following which the broker agreed to increase the price of the oil. After few years, the contractor again wanted an increase in the price and again broker agreed. After couple of years, the contractor proposed that he wants the price to be made as per the international price of oil. The broker agreed to revise the price. But being the election season, such dictates of the contractor is embroiled in a deep controversy.
In the instant case, instead of oil it is the gas that is in dispute wherein Reliance Industries is the contractor and ruling and opposition parties are the brokers. The parliamentary election of 2014 will decide whether or not the contractor will be able to bribe the brokers yet again. Meanwhile, one of the key individual brokers in the case has made himself immune from prosecution. It is he who will decide which coalition to invite for government formation at the centre in the likely event of a hung parliament. Like oil wells, gas which is discovered in India too belongs to Indians and it is Indians who are supposed to pay the higher price for gas because of collusion.
As government records, the 7,645 sq km block in KG basin has been named KG-DWN-98/1. The KG basin is the largest natural gas basin in India. A contract was signed between the government of India and undivided Reliance Industries and its minority partner Niko Resources (10 per cent stake) for exploration and production of oil and gas.
Which Indian company is more powerful than Government of India? Long before Aam Aadmi Party raised the issue of manipulation in the gas prices, Tapan Sen and Gurudas Dasgupta had established the fact of manipulation. S Jaipal Reddy was shunted out from ministry of petroleum and natural gas because he was strongly opposed to increase the price of the gas.
Sen, a member of Parliamentary Standing Committee on Petroleum and Natural Gas has argued that the recommended formula for gas pricing in India is based on a wide variety of gas prices ruling in US, Europe and Japan and the netback price for imported LNG for India without taking into account the actual cost incurred by the domestic players for discovering and evacuation of the gas which is available aplenty within the country.
Although the matter was sub judice in the Bombay High Court, the gas price allowed to the contractor by Government’s empowered group of Ministers headed by Pranab Mukherjee on an earlier occasion at $4.2 per million British thermal unit (mbtu) in 2007 was already quite profit making for the contractor, if the price of $2.4 offered by the contractor itself to NTPC through an international competitive bidding is factored in. In fact even the $ 2.4 per mbtu was pegged at a higher price considering the fact that ONGC was supplying gas to the government at half the rate. Mukherjee headed committee ignored the objection of Surya P Sethi, Principal Advisor, Power and Energy to the Government of India who had argued that the cost of production nowhere more than $1.43. The $2.34/MMBTU bid by RIL, in a global tender, for the same gas has been ignored. Sethi was supported by the then Cabinet Secretary in vain. Sethi wrote an open letter dated December 23, 2013 to the Prime Minister saying, “A sham price discovery exercise was permitted to justify the higher price that the approved formula delivered.”
In fact pre-qualification norms have been diluted to ensure RIL qualified according to the findings of Comptroller and Auditor General's findings.
Krishna Godavari (KG) Basin is spread across 50,000 sq km in the Krishna River and Godavari river basins near the coast of Andhra Pradesh. The site Dhirubhai-6 (D6) is site of the biggest gas reserves in India. Government of India opened up hydrocarbon exploration and production in the country to private and foreign players in 1991. Small and medium sized blocks were opened up in this round which was followed up by giving out bigger blocks in 1999 as per the New Exploration and Licensing Policy (NELP). Reliance bagged the rights to explore the D6 block. Some people say that these reserves were known to government but Reliance Industries ‘discovered’ it.
The Reliance Industries Limited (RIL) is the first company to supply natural gas from June, 2008 onwards and has been pushing for market discovered price as their future pricing policy. As part of comments of various stakeholders on RIL’s Gas Pricing, even Dr. Y.S. Rajasekhara Reddy as Chief Minister, Andhra Pradesh has observed, “In the case of NELP projects, more particularly of RIL, the privatization is leading to a perfect monopolistic situation; a government monopoly being substituted by a private monopoly. Even the die-hard capitalists and champions of market economy would ungrudgingly concede that a private monopoly is highly dangerous and is decidedly against public interest. Where there
are not many suppliers of gas and where there is huge demand and supply gap, the RIL is trying to obtain bids from some desperate consumers at prices varying in between $4.5 to $5 per mmbtu and are claiming this to be the market driven price, forgetting that as a part of global competitive bid floated by NTPC, Gandhar, RIL itself had quoted a price of $2.97
per mmbtu including the transportation charges. This in fact should be reckoned as true market price, as there was global competitive bidding, where many others had participated and where there was perfect transparency in evaluating the bids. The RIL, having now realized its predominant monopolistic power, is trying to raise the bogey of a legal dispute to come out of the NTPC contract so as to wipe out $2.97 per mmbtu price quoted by them out of the memory of the people.” Late Dr. Y.S. Rajasekhara Reddy’s words sound prophetic in the current context.
In such a backdrop, it does not appear surprising that as Delhi’s chief minister Arvind Kejriwal had ordered the state Anti-Corruption Branch (ACB) to file a case against Union petroleum minister M Veerappa Moily, former minister Murli Deora, Mukesh Ambani, chairman, RIL and V K Sibal, former director general hydrocarbons for allegedly overpricing of natural gas and underproduction from RIL's KG-D6 field. This was done following the complaint filed by E A S Sarma, former Union Power Secretary, TSR Subrmanian, former Cabinet Secretary, Admiral Tahiliani and Kamini Jaiswal, a noted Supreme Court lawyer.
In late March 2014, the Election Commission of India ordered deferment of an increase in gas prices that was to take effect from April 1, 2014 saying that the decision should be left to the new government that will be formed after the general election.
KG-D6 field is considered country’s largest gas find since its discovery in 2002. Notably, British Petroleum (now named BP) bought a 30 per cent stake for $7.2bn in 2011. This collusion is akin to the collaborators of East India Company, a transnational company headquartered in London and the British Government. Is it a coincidence that a British transnational company is involved once again in seeking overpricing of the gas?
For more information about the book visit: www.gaswars.in
For Details: Gopal Krishna, ToxicsWatch Alliance (TWA), Mb: 08227816731, 09818089660, E-mail:firstname.lastname@example.org, Web: www.toxicswatch.org