RELIANCE:The Great Gas Heist // Brooms And Boardrooms

RELIANCE:The Great Gas Heist
In the Niira Radia tapes, there’s this one delicious conversation the PR lady has with lobbyist Ranjan Bhattacharya. It was May 2009, and UPA-II cabinet formation was in full swing. Bhattacharya quotes Reliance Industries’ Mukesh Ambani as telling him, “Haan yaar, you know Ranjan, you’re right, ab toh Congress apni dukaan hai.” Apoc­ryphal or not, that earthy expression of ownership is relevant in the aftermath of the UPA’s recent decision to raise gas prices for five years, starting at a flexible $8.4/mmbtu—conceding a long-standing demand by India’s most powerful business house and its global partner BP.

This must be said because, apart from the Left parties and AIADMK, few even in the political establishment are raising obvious questions about this deal, of which Reliance, the country’s largest private sector gas producer, is the major beneficiary. The whole pricing exercise has been riddled with conflicts between the ministries of power, fertiliser, finance and petroleum; the formula has invited severe criticism; and there’s an attempt by the UPA to airbrush the obvious negative impact of the hike on the common man and taxpayer. Nearly everything will become expensive; or, obviously, the taxpayer will bear these subsidies.

Back-of-the-envelope calculations by Outlook show that the cost of this gas hike on just the power, fertiliser and lpg industries will be in the range of Rs 54,500 crore per annum. Also, the costs of industry in general will go up. “It is a massive loss to the nation. Already, fertiliser prices are soaring. Now, they will be increased again. This is a clear case of placing profit above people,” says Prof K. Nageshwar, an MLC from Andhra Pradesh. On the other hand, aided by a depreciating rupee, gas producers will rake it in. “Every $1 increase in gas price means $73 million profit for Reliance,” says Nageshwar. The irony: gas was meant to be a cheap, green fuel.

There’s also a political brazenness to the timing. A decision slated for April 2014 has been announced a good ten months before, neatly sidestepping an election code of conduct and buying the support of a crucial corporate. Given that AIADMK has said that it would review the deal if a coalition it is part of comes to power, this pre-emptive pricing takes the decision out of the hands of (potentially, of course) an unreliable Third Front coalition. “With elections around, who’d want to upset a major source of funding?” says a political analyst.


Given the token response by the BJP (see box), it appears that the national interest will ignite in the principal opposition party only after 2014. It’s no secret that, considering the growing (and open) corporate support for Narendra Modi, the UPA has made a political bargain by keeping Reliance happy. It is not just political parties that are observing a measured silence. Industry chambers, normally eager to put their point across to the media, were also trying to avoid eye contact. Last week, Modi, who normally draws a full house in his meetings, saw only a handful of prominent industrialists attending his session at a CII conclave in Mumbai.

Finance minister P. Chidambaram and petroleum minister Veerappa Moily have rightly pointed out that currently the public-sector ONGC and OIL dominate gas production. But what they have failed to clarify is who will bear the subsidy burden for the power and fertiliser sectors. Going by the track record of the government, the state-owned exploration companies may well have to pick up the tab. That leaves only Reliance. With global energy giant BP as its partner, there is no telling when the incentivised partners may reverse the drop in production to capitalise on the higher gas prices. “They (Reliance) have been waiting for this announcement for a long time. Production will go up,” says a person associated with Reliance’s D-6 block in the Krishna-Godavari basin, declining to be quoted. “The biggest beneficiary is going to be Reliance—eyes closed.”

Against the committed production of over 70 million metric standard cubic metres per day (mmscmd) at the KG basin, output has been as low as 15 mmscmd... read more:
http://www.outlookindia.com/article.aspx?286692

SABA NAQVI - Brooms And Boardrooms
The David and Goliath story has been a most enduring one down the ages. Delhi’s chief minister Arvind Kejriwal this week made a move that clearly positioned him as the small man with the muffler taking on the richest man in India. The resident of Antilla, the tall skyscraper in Mumbai where India’s first business family lives, is the clear target in a political positioning that is both powerful and controversial.

In a dramatic move last week, the AAP government in Delhi directed its anti- corruption branch to file an FIR against Mukesh Ambani, chief of Reliance Ind­ustries Limited and Union oil minister Veerappa Moily among a few others. The charge: conspiracy to double gas prices in order to benefit, among others, RIL. Simultaneously, AAP’s Yogendra Yadav questioned Narendra Modi’s closeness to the Adani group. How has Adani become super-rich in just 10 years? What is his relationship with Modi? he asked in a series of tweets.

Clearly, crony capitalism was under the AAP scanner. Journalist Paranjoy Guha Thakurta has a book coming out soon titled Gas Wars: Perspectives in Crony Capitalism—The Ambani brothers and the battle for India’s natural resources. He has this to say: “The Ambanis could not have ripped off the system if the government had not allowed them to do so.” His book argues that brothers Anil and Mukesh Ambani fell out over the utilisation of the KG basin gas resources, with the older brother eventually winning in court. It also chronicles how successive governments structured contracts in order to benefit the Ambanis. He asks: “It is worth noting that the Manmohan Singh regime is supposed to be firm believers in virtues of the free market. How is it then that in the case of gas they are for administered prices determined by the government and not open market prices?”

The political response to AAP’s actions from the two big political parties has been muted—they feel it’s another hyste­rical act from someone who’s been beha­ving unreasonably ever since becoming CM less than two months ago. The BJP’s Arun Jaitley probed the legalities and constitutional viability of a state government seeking to investigate the actions of the Centre in an article. “The AAP government must realise that enthusiasm and adventurism may not set the best of constitutional precedents,” he wrote. Congress spokesperson Ajay Maken told Outlook: “Let us hope there is no political vendetta on the part of AAP. Meanwhile, we are open to all investigations.”

The consensus of the traditional ruling class appears to be that AAP is badly behaved, unreasonable and itching for its government to be brought down. There is no way of knowing whether that is indeed the case, but one thing is clear: they have no intention of following table manners at the crooked high table... read more:

http://www.outlookindia.com/article.aspx?289513

See also:

Babu Bokhariya, minister in Narendra Modi's cabinet, convicted for illegal mining

Vibrant Gujarat? Your Coast Is Not Clear, Mr Adani

How Adani got contracts for supplying power despite being the most expensive

Adani-Modi nexus to cost 23,625 cr

Rohit Prajapati and Trupti Shah - Capital, Labour and Environment in Modi’s Gujarat

NAPM Press Release: Sardar Statue, Not for ‘Unity’, but for Polity of Falsehood

Gujarat Government cracks down on right to freedom of expression // Activist and villagers detained

NAPM - Press Release Nov 25 - Modi and the Narmada

NAPM India: Over 100 Organisations Demand World Bank Withdrawal from Tata Mundra Power Project in Gujarat

Snoopgate and the Gujarat Model of Governance


AAP Statement on Aseemananda

 Anti-Sikh riots: AAP gets L-G nod for SIT probe

Arvind Kejriwal orders FIR against Murli Deora, Veerappa Moily & Mukesh Ambani

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