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Is the Oil Ministry an ?Ambani ki Dukaan?
Ravi Srivastava | 23 Aug 2013

 

It was a chilly evening in Delhi sometime in the last week of January 2006, when incumbent Minister of Petroleum Mani Shankar Iyer was told to vacate his seat for another Congress Rajya Sabha member Murli Deora . In fact, Iyer had  served for a brief period and had lost his utility and value. Being a veteran civil servant, he was not fitting for the role of a fund raiser for a ‘creamy’ Ministry like Petroleum. He was a straight forward person who would only call a spade a spade.In contrast, Deora was a one-time Mayor of Mumbai, a fond “uncleji” of Ambani clan and a one time partner in ‘Cutting chai’ with Late Shri Dhirubhai Ambani. The maverick Industrialist knew how to make use of every hole in the porous Industrial policy of Government of his time.

Back then, the need of the hour was to milch the cow after awarding the KG-Basin (Krishna-Godavari basin) with lot of fanfare and aggressive announcements that there is 3TCF(Trillion cubic feet) of gas to be extracted from above fields, gas production will be 80Mmscmd (Million Metric Standard Cubic Meter Per Day) and India will be suddenly be on a high growth trajectory. Gas linkages to many Industries apart from high priority  Power & fertilizer Plants were quickly decided. Current  situation where 20000 MW worth Power generation capacity of power plants is idle for the want of the assured Gas.

 

Meanwhile, post a show of separation, junior Ambani was planning a UMPP (Ultra mega power plant) in Dadri, UP and asked elder brother to provide uninterrupted Gas supply @ 2.8$/per million BTU(British Thermal unit) , quoting some PSC (product sharing contract) between brothers. It’s interesting to note that nobody in the Govt. ever asked how brothers can decide the sharing of a National property. However, the elder Ambani declined, and dragged the matter to The High court of Bombay, which passed the ruling in favor of Anil Ambani .

 

This was an undisputed fact that respective Governments whether UPA or NDA were protégés of the Ambanis, the famous 3As Anil, Amar and Amitabh were almost blood brothers. Post separation, the Ambani brothers were striving hard to build their individual empires. While UPA repeatedly helped Ambani to raise gas prices and earn billions of Rupees, the NDA had almost sold the family silver. Then the Govt decided to sell PSUs like BPCL, HPCL, Oil marketing and refining companies on a platter in 2003. The due diligence started and the then Minister Ram Naik made up his mind to hand over these companies to Ambani, Ruia, British Gas (BG) or Shell for a substantial consideration. In 2003 Hon’ble supreme poured water on NDA plans and ordered that companies created by an Act of Parliament cannot be sold unless the act is repealed, The NDA never had numbers and courage to take such an extreme step and was stopped in its tracks. The political experts  say, that this was the last nail in NDAs coffin, post which they were ousted in the 2004 Lok Sabha Elections.

 

RIL presented to the Government that their capex (capital Expenditure) in developing the KG D-6 has multiplied 4 times i.e. from the initial estimate of 2.2Bn$ to nearly 8.8Bn$ or roughly Rs 42000 cr (at existing dollar conversion)  justifying by stating that the cost of hiring rigs and drilling have gone up and they can’t afford to sell gas @2.8$ anymore. RIL demanded a price of 4.2$/per million BTU.

The Government referred it to the then DGH (Director general of Hydrocarbons), V.K.Sibbal who supported it outright. Later, CBI charge sheeted him and he was summarily shunted in Oct2009. It was found that Reliance had bribed him by gifting white goods to his daughters along with some property in Delhi as confirmed by a mail in possession of CBI. It is very interesting to note that only this month has the CBI indicated that they are going to close the case and as a result a further increase in gas prices is in the offing.

 

The UPA Govt agreed to raise gas price which was to benefit RIL by nearly Rs. 30000cr i.e. till March 2014, the UPA was fighting anti incumbency in 2009 and supposedly received Rs 1000 cr for this purpose from a famous industrial house, paying 1000 cr for earning Rs. 30000 cr was a small change .

 

Deora’s conduct was suspicious from day one. Apart from sinking the entire oil sector (a sunshine sector once upon a time) he introduced a “Marker system” by making a show of checking adulteration and sunk another  Rs. 250 cr down the drain without accruing any tangible benefit. He forced oil companies to part with hefty credit for uplifting ATF (Aviation Turbine Fuel) by OMCs (Oil Marketing companies) to oblige his friend Praful Patel who had interest in King Fisher Airlines(KFA). Oil companies barely scraped through by encashing their bank guarantees while today KFA is a sunk Airline and Vijay Mallya is a beleaguered industrialist

 

There is an interesting episode to vindicate Deora’s love and affection for RIL. In the forenoon of 18th July 2009, at Deora’s Peddar Road residence, he received a call on his direct line. At other end was Secretary Petroleum S.Sunderesan confirming to have filed an affidavit from Government side as intervener in Hon’ble Supreme court in RIL-RNRL (Reliance Natural resources Ltd) an Anil Ambani company, stating that Gas is a “National Asset” and Govt should also be heard (till that date Government did not  know that Gas is a National asset, during whole Bombay High court case). Writer distinctly recalls Deora telling Sunderesan @11.45 AM that day to ‘make sure that the elder brother’s interest is protected’. Such was the extent of the Government’s worry for Reliance and throwing the so called nation’s ‘energy security’ to winds. Readers may recall the cat & dog fight between the Ambani brothers that occupied the front page of Economic Times, throwing muck on each other publicly.

 

 

The Govt swiftly assembled an EGOM (Empowered group of Ministers) headed by then MoF Shri Pranab Mukherjee , who examined the DGH’s report and approved price of Gas @4.2$/per million BTU. Hon’ble SC approved the same through a bench headed by CJI Shri K.G.Balakrishnan in the 1st week of May 2010. He was appointed as NHRC chairman (Cabinet Rank) within 1 week of his superannuation after this order and continued to enjoy the red beacon car. Interestingly, a little later his kin was named in a land scam in Kerala and also in a disproportionate income case.

 

By the end of 2010 Deora had become a liability for the Congress as he had sunk the oil sector beyond recovery. During his 5 year tenure from 2006-11 domestic refineries production was muted and private refiners were enjoying the production cost of domestic refineries and now exporting  as much as 60 MMT. You must have read in very recent press reports that private refiners earned as much as Rs.10000 Cr at the expanse of PSU Refineries. PSU refineries’ GRM has plummeted to barely 2.5$/bbl compared to GRM (Gross Refining Margin) of 8-10$ of Reliance refinery which can process various kind of crudes starting from ‘Arab Light’ to the highly viscous Bombay high or Cairn crude. Deora  was parked in ‘corporate ministry’ for a short tenure of 6 months and shown an exit door by July 2011. He continues to be a Rajya Sabha member while his son Milind Deora has been accommodated  as MoS in IT & shipping as a ‘long term service award’ for his father .

 

Those Ministers/Officers who did not tow the line of Reliance were eased out after Shri Jaipal Reddy took over in Jan 2011. He preferred an enquiry into capital expenditure of Reliance, an Audit by CAG(Comptroller &Auditor General), mulled penalty for short production of Gas which had plummeted to 21 MMscmd vis-a-vis promised 80 MMscmd. Reddy categorically denied any runway increase in Gas price, till RIL compensates for short production. RIL profusely opposed any audit and even to part with the documents of capex. Such postures collectively created discomfiture for ruling UPA and Reddy was replaced by a yes man, Moily in Oct 2012. This appointment vindicated Arvind Kejriwal’s famous quote ‘Congress & BJP are nothing but Ambani ki dukaan’. Late Shri  Dhirubhai was a maverick in Ministry liaisons and used to keep even a section officer of MOP&NG (Ministry of Petroleum & Natural Gas) in good humor. Host of mails were circulated in 2007-08 on his style of functioning. However, the present leadership of RIL does only boundary management with top babus.

Moily‘s arrival has turned fortunes for Reliance and the biggest deal between UPA-II and company has assured increased gas price of 6.8$ per million BTU w.e.f  1.4.2011. In a repeat of 2009 Congress is staring at General Elections once again and crores of Rupees will change hands for contesting it. Recent change in assignment of a JS-MOPNG Girdhar Armane is a live case of Reliance’s influence on MOP&NG.

To conclude, whether any ruling coalition is in power, they have given Reliance a kid glove treatment at every stage by, for e.g., allotting huge acreage to explore, accepting Capex on face value, part of asset sale to British Gas, allowed price rise of gas as & when asked for.  All this, at the cost of suppressing domestic explorers and  refiners. Even Media is shy of reporting the truth about Reliance, due to gag order by the company in Oct 2012 after expose of their operations.The cobweb of holding companies of Reliance was never questioned by the Corporate Affairs Ministry. All this is not independent; everybody has taken their pound of flesh in quid pro quo. That is the only way to justify otherwise the SEZ status to Reliance for exporting the entire 55 MMT of product, refined by them when the Nation is bleeding for foreign exchange and cheaper fuel every day?

 

 

(Writer is an Oil Company official, Energy expert and Political Activist)