The indulgence which turned gas into gold

BEFORE 2G WAS KG: The CAG has said “irregularities” in RIL’s operation of the KG Basin D-6 block gasfield have led to an as yet unquantified loss to the public exchequer. In this file photo from 2008, Reliancechief Mukesh Ambani greets senior PMO officials M.K. Narayanan, now the Governor of West Bengal, andT.K.A. Nair, as Murli Deora, who was Union Minister for Petroleum and Natural Gas, looks on. Photo: Rajeev Bhatt   | Photo Credit: Rajeev Bhatt

The dust has not even settled on the 2G spectrum scam and the Manmohan Singh government has been hit by another storm: the report of the Comptroller and Auditor General (CAG) on irregularities committed in the offshore KG Basin D-6 block to favour the Mukesh Ambani-owned Reliance Industries Limited. Parliamentarian Tapan Sen — a Rajya Sabha member from the Communist Party of India (Marxist) — has been demanding a probe into the KG project for the past six years. The final CAG report has corroborated many of the issues Mr. Sen had raised with the Petroleum Ministry as well as with the Prime Minister and his office. A member of Parliament's Standing Committee on Petroleum and Natural Gas, he spoke to Sujay Mehdudia on the alleged regularities, the indifferent attitude of the Prime Minister and PMO, and the nexus between RIL and the UPA government in gas exploration in the KG Basin. Excerpts from the interview:

With the CAG's final report out, should the government launch a full-fledged investigation into the KG basin operations of RIL?

An investigation should have been ordered long back. The CAG has only confirmed the issues raised by me during the past six years. The UPA government has been in denial mode on corruption in the KG Basin D-6 block. It is dragging its feet and does not want to take on a private contractor who has indulged in unjust drainage of the national exchequer. Right from the issue of gold plating to raising the gas price irrationally and abnormally, everything has been done to satisfy the private contractor. Now the circle is complete. Gold-plating was done to get a bigger profit in whichever manner possible. Allowing gold-plating at the beginning and then hiking the gas price to almost what had been demanded by the private contractor indicated a nexus at the highest level. Despite repeated pleas, the government has been indifferent to the issue. I have read in the media that the CBI is looking into the issue but till something concrete happens or it emerges from the CBI that they have launched investigations into the matter, I would not like to believe reports that a probe is actually happening.

What is the most important aspect of this issue that needs to be probed?

The matter is linked to energy, which is very important and a lifeline for the people and the country. The whole issue relates to fuel, and national interest was not taken on priority. This issue has brought out the holes in the system and questions the integrity of the whole system of governance. The irregularities in KG Basin D-6 block need to be probed on top priority.

What was being done was so visible right from day-one. It all began with the submission of the field development plan (FDP) by RIL. The initial FDP was for production of 40 mmscmd [million metric standard cubic metres per day] of gas at a cost of $2.47 billion. Subsequently, the FDP was amended and the production target was raised to 80 mmscmd but the FDP went up four times to a whopping $8.84 billion. The whole FDP was approved by the Director-General of Hydrocarbons, V.K. Sibal, who is facing CBI investigations now, in 33 days flat. How could such a big cost escalation be approved in just 33 days, that too when doubts had been raised inside and outside Parliament?

Do you think that the $4.2-per-mmBtU price fixed by the Empowered Group of Ministers in 2007 was unjustified keeping in mind that international gas prices had been declining?

Unfortunately, the whole governance is captivated by the corporates today. The government went ahead and approved the gas price almost in toto — to what was suggested by RIL. A slight difference was made to say that they had not accepted what RIL suggested. There was another impropriety done. RIL, which quoted $4.3 per mmBtu to the EGoM, quoted $2.34 per mmBtu in the international competitive bidding tender of NTPC. They would not have quoted $2.34 per mmBtu without keeping a profit margin. The same RIL is on record in the Supreme Court on an affidavit that their basic cost of exploring gas is much less than $2 per mmBtu. The Committee of Secretaries had opposed the gas price being fixed at $4.2 per mmBtu. The Power and Fertilizer Minister had opposed that price. All this was given in writing to the EGoM headed by Pranab Mukherjee, that NTPC would be losing Rs.24,000 crore on two projects — Gandhar and Kawas — if the $4.2 price was accepted instead of the tender price of $2.34. But the EGoM went ahead and approved a higher price shamelessly. I think the gold-plating issue needs to be probed thoroughly, but also the issue of gas price fixing. The truth should be brought out before the people who have been burdened and made to shell out more to benefit a private contractor. At that point of time, too, I had asked the government to explain on what basis RIL fixed the price of $4.3. The EGoM, just to posture and fool the people, agreed to $4.2.

How do you see the role of the Prime Minister and the PMO in this whole matter?

Without being too uncharitable, I can say the role of the PMO and the Prime Minister has been indulgent. It is not something post facto as the Prime Minister has been claiming in various cases. The issue was pointed out by me way back in 2006. The matter was raised in Parliament. Every fact was put in the public domain, in writing, but no action was taken for some strange reason. The CAG and its report came on the scene much later. I cannot but point the finger at the Prime Minister in this whole affair, and not single out the Petroleum Ministry as they do not have the power to do such a big thing. Like A. Raja cannot be singled out in the 2G scam, one man cannot be singled out. Others cannot just wash their hands off in the present system of governance. In 2007, I wrote to the Prime Minister pointing out the irregularities. I wrote that I am not satisfied with the Petroleum Ministry's presentation made to me. I wrote four or five times. Only once was it acknowledged.

What do you make of the sudden fall in production of gas from the KG Basin D-6 block?

The latest development of a stake-sale to BP has added colour to the whole scandal. For 80 mmscmd, they had estimated their cost of production at $8.84 billion. And now they have sold 30 per cent of that at $7.2 billion. So they have already realised their cost! But the government will only be able to get its share after 10 years. The government was also hasty in giving clearance to the RIL-BP deal. I wrote to the government that in view of the controversy that had come up, the government should review the clearance. There is a deliberate design to ensure that there should not be any hurdle in the way of the contractor. Now there is a drastic fall in production, and even the Petroleum Ministry has gone on record saying that RIL has not dug the total number of oil wells that was committed to by it under the FDP. The production has fallen for this reason. Although they are committed to 80 mmscmd, production today is hovering around 40 mmscmd. It is a clear game. Now they have already started lobbying for increasing the gas price to $5.2 or $5.3 per mmBtu. This is nothing but pure pressure tactics — by not ramping up production and then seeking an increase in gas price.

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Printable version | Apr 23, 2021 9:11:22 PM |

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