India Against Corruption on Wednesday launched a scathing attack on the NDA government as well as the Manmohan Singh government for protecting the interests of corporates, especially Reliance Industries Limited (RIL). It demanded that the government’s contract with RIL be scrapped as the Mukesh Ambani’s company allegedly cut down on production from its KG D6 gas- field to gain huge profits after the proposed gas price revision.
Linking the shifting of Jaipal Reddy from the Petroleum and Natural Gas Ministry to his refusal to follow RIL’s diktat to revise the price before the scheduled deadline of April 2014, IAC leader Arvind Kejriwal said Mr. Reddy was shunted out as he refused to bow to RIL, arguing that a price revision would fetch the company an additional profit of Rs. 43,000 crore.
“Mr. Reddy had prepared a note for the Empowered Group of Ministers (EGoM), in which he mentioned that acceptance of RIL’s demand would mean an additional profit of Rs. 43, 000 crore [to the company]. Most of this gas is used in power and fertilizer production. Increasing the gas price would mean an additional financial burden of Rs. 53,000 crore on the Central and State governments. This would in turn mean higher power and fertilizer prices… or a higher subsidy burden on the taxpayer,” Mr. Kejriwal said in his third expose, after targeting Congress president Sonia Gandhi’s son-in-law Robert Vadra and BJP president Nitin Gadkari.
Mr. Kejriwal, who addressed journalists, along with Supreme Court lawyer Prashant Bhushan, said that in 2006, it was Mani Shankar Aiyar who got the axe and Murli Deora was brought in to allow RIL to increase capex from $2.39 billion to $8.8 billion and to increase the gas price from $2.43 per Million Metric British Thermal Units (mmBtu) to $4.2 mmBtu. “We demand that the contract with RIL for the KG D6 be scrapped immediately and the state-run companies like ONGC be given the block for future production. The government should immediately put in place adequate systems to get full production from the KG D6 at the cheapest prices for the country and its people.”
Mr. Kejriwal said that under RIL’s contract, the company was supposed to sell gas at $4.2 per mmBtu until March 2014. But midway, the company wanted the price increased to $14.2 per mmBtu.
Mr. Kejriwal and Mr. Bhushan alleged that to pressure the government to revise the gas price, RIL had substantially reduced production for over the past one year. The total consumption in the country stood at 156 Million Metric Standard Cubic Metre Per Day (mmscmd). RIL was supposed to produce 80 mmscmd from 2009. However, it was turning out just 27 mmscmd. “Production was being artificially kept low to blackmail the government. They are not just hoarding gas but also forcing various consumers to buy gas from abroad. Gas from abroad costs $13 per mmBtu, and if RIL’s demand for increasing the gas price is accepted, it will lead to the shutdown of several gas-based power plants and an increase in power and fertilizer prices. It will result in Rs. 43,000 crore of additional benefits to RIL.”
Mr. Kejriwal said the drastic reduction in gas production forced many gas-based power plants to shut down or run with a reduced capacity. “Today, power from a gas-based power plant costs Rs. 3 a Kwh (Kilowatt hour). If the gas price is increased from $4.2 to $14.2 as demanded by RIL, power rates will go up to Rs. 7 a Kwh. “We urge the people of this country not to allow the government to pass the huge benefit to RIL and [to] flood the Petroleum Ministry and its new Minister, Veerappa Moily, with RTIs [Right to Information questions] … so that he does not dare to undertake any revision. We should not allow this government, which changes Ministers at the instance of Mr. Ambani, to work at the direction of RIL.”
Mr. Kejriwal played the clippings of tapes, involving conversations between corporate lobbyist Niira Radia and Atal Bihari Vajpayee’s son-in-law Rajnan Bhattacharya. “First, the NDA regime favoured RIL in the structuring of the deal in 2000, and various modifications were made thereafter.” Citing the CAG’s report on the KG D6, he alleged that the motivated structuring of the contract could cost the exchequer up to Rs. 1 lakh crore.
He said RIL had signed a contract with state-run NTPC in 2004 to supply gas for its power plants at $2.34 per mmBtu. However, the company backed out of the deal, and the matter was in court. “UPA I or UPA II did not deem it fit to vigorously take up the case of NTPC against RIL, but worked in a proactive manner to get the price revised for RIL gas. The EGoM, headed by the then Finance Minister, Pranab Mukherjee, revised the gas price to $4.2 per mmBTU, and by doing so, it gave RIL an undue benefit of Rs. 8,000 crore.