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:gopalkrishna1715@gmail.com,
Web: www.toxicswatch.org
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