What the new government does about gas prices will signal whether Reliance Industries continues to dictate policies. A new book throws light on this
Just a week before the first phase of the general elections, the Congress government ‘quietly’ sought to impose anti-dumping duty on imports of purified terephthalic acid (PTA) sparking a furore in the user industry.
Even angry chambers of commerce did not openly allege that the sole beneficiary of the duty hike would be Reliance Industries, which would reap big profits from the cost imposed on foreign suppliers. There is a massive demand-supply gap in PTA in India.
Anybody who has followed Reliance Industries over the decades, knows that it negotiates a quid-pro-quo for funding political parties, especially at election time. Was this bonanza proposed after the Election Commission stopped the UPA government from doubling gas prices?
What should we expect if there is a Bharatiya Janata Party (BJP)-led government at the Centre? If the BJP, indeed, forms government, it will be because many Indians invested their hopes in one man’s promise to provide good administration, economic development and to act as a chowkidar to India’s national wealth. It remains to be seen whether he is put to the test and delivers on his promises.
Too many times, in the past 65 years, we have had our hopes raised only to be dashed to the ground in a few months. However, at no time, since 1947, have we seen the wanton loot of national resources and personal aggrandisement as in the past decade of pusillanimous governance and vindictive tax administration by the United Progressive Alliance (UPA). Crony capitalism meant industrialists dictating policy from inside the parliament. These projects were then funded by nationalised banks leading to a second round of loot in public sector banks’ accumulation of massive bad loans.
The list of dubious decisions is long and covers telecom, coal, gas, steel mines, infrastructure and road-building contracts; destruction of public sector undertakings (Air India) and loot of banks’ resources and a tacit immunity from draconian tax and compliance laws (Sahara pariwar) for which individuals and small businesses are easy targets.
India’s new oligarchs felt confident enough to flaunt their wealth with abandon through towering super-luxury homes, private jets, yachts and fancy wheels, even while 300 million+ poor people were sought to be appeased through various doles and subsidies.
Companies, like Deccan Chronicle and Kingfisher, dared to bid for IPL cricket teams—the newest wealth symbol—even when their bad loans to banks ran into hundreds and thousands of crores of rupees. Then there was Sahara, long-time sponsor of the Indian cricket team in a cricket-crazy nation. By its own claims, Sahara has raised over Rs73,000 crore of public money through multiple companies and instruments without even following basic know-your-customer norms.
While the long hand of the law appears to have caught up with this bizarre group, it is still significant that India’s investigation and taxation machinery continues to remain silent about this group’s endless supply of money which seems to have vanished just when it was needed to get its chairman, Subrata Roy, out of jail.
As we await a new government, and the promise of change, a book called Gas Wars: Crony Capitalism and the Ambanis is a timely read. Authored by intrepid journalist, film-maker and teacher, Paranjoy Guha Thakurta, along with Subir Ghosh and Jyotirmoy Chaudhuri, the book chronicles the rise of the Ambanis through their quest for control over gas from the Krishna-Godavari basin.
Scheduled for release on 15th April, Gas Wars has been painstakingly researched, extremely detailed, unflinchingly direct and careful to incorporate a wide cross-section of views. Paranjoy has also been careful to avoid the trap of cowardly, easy-to-pressure publishers (who killed, or withdrew, books on Sahara and Air India, based on a legal notice) by self-publishing it.
Gas Wars is an important addition to India’s business history, not merely because it explores what has been called the ‘great gas heist’ but also places in perspective the relentless growth of the Reliance empire through the support of multiple governments, barring a couple of big hiccups.
Paranjoy skims over the ground covered in detail by Hamish Macdonald’s Polyester Prince (blocked through a simple stay order from a lower court) but stays focused on how the Ambanis have manipulated policies to their advantage. Gas Wars also illustrates how trenchant Ambani critics, like Arun Shourie, did an about-turn to help accelerate RIL’s monopoly control over chunks of the petrochemicals business.
Under the BJP-led NDA government’s disinvestment programme, RIL acquired the giant IPCL (Indian Petrochemicals Corporation Limited) giving Reliance priceless real estate and a near-monopoly on a host of petrochemicals products. The group almost succeeded in getting the government to privatise Bharat Petroleum and Hindustan Petroleum as well as parts of Indian Oil Corporation. Had that not been stalled by a court order, it would have given RIL control over retail sales of subsidised petroleum products.
In a significant interview in 2009, the late Subir Raha, former chairman of ONGC, told Paranjoy that successive governments failed to protect national resources like natural gas and minerals. Mr Raha pointed out that the disinvestment of Bharat Aluminium Company Ltd (BALCO) privatised the biggest reserves of commercially available bauxite in the country without undertaking a proper independent valuation of the mineral resources that would accrue to the private company. It is now part of the Vedanta group headquartered abroad.
Mr Raha firmly believed that the petroleum ministry deliberately laid the ground for endless disputes in the pricing of gas through a badly drafted production-sharing contract. Since the ministry, as well as the petroleum regulator, was packed with Ambani acolytes (as alleged, and exposed, by Anil Ambani), it was bound to work to Mukesh Ambani’s advantage.
The charges traded by the brothers, in the lead-up to the significant Supreme Court judgement of 2010, led to the exposé of many cosy deals between RIL and various ministers and government officials. When the Supreme Court judgement ended the war between Mukesh and Anil, the murky business—of gas pricing, gold-plating of exploration costs and the truth about the extent of reserves in the Krishna-Godavari basin—would probably have been buried too. But it erupted into the public domain for several reasons.
First, an activist Comptroller & Auditor General (CAG) produced a damning report on hydrocarbon production-sharing contracts and indicated that RIL had reaped massive profits because of acts of commission & omission by various bureaucrats and ministers. The CAG alleged, among other things, that the contract with RIL was flawed, thereby encouraging excessive capital expenditure and lowering potential benefits to the exchequer.
Meanwhile, as global petroleum prices soared dramatically, to over $100/barrel, something interesting happened at the K-G basin. India’s gas reserves, which were supposed to make us self-sufficient in gas, began to shrink dramatically and inexplicably.
Meanwhile, RIL began to lobby intensely for higher gas prices, in line with global trends.
There have been plenty of arguments for and against the demand to hike prices; the most significant of these, made by Reliance itself, is that we are already paying significantly higher prices for imports which only benefits international companies and consumes scarce foreign exchange. On the other hand, many believe that RIL is deliberately understating the K-G basin gas find and the well may get re-charged publicly, or clandestinely, once domestic gas prices are hiked.
The Congress-led UPA government was all set to double gas prices in April 2014, but for the Election Commission’s order to defer the hike until 16th May. This will now be the first big decision for the new government to take and, whatever it decides, will only fuel controversy. The decision will also signal whether RIL and Mukesh Ambani will continue to dictate government policy in the coming five years.
Whatever one’s political affiliations, it is worth reading the detailed chronicle of facts and issues in Gas Wars with an open mind, in this brief interregnum between two governments. It will allow you to make a dispassionate assessment of the new government, if you agree that crony capitalism and concentration of power through a nexus of business and politics is what is holding India back from progressing much faster.
Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]
Inflation in rural areas fell to 8.51% in February 2014 from 9.35% in January 2014. Combined inflation for urban and rural areas eased further to 8.1% in February, from 8.8% in January. Food inflation in rural areas eased to 9.25% in February, from 10.56% in January. Inflation for vegetables in rural areas fell to 17% in February, from around 24% in January. Inflation for milk and milk products increased to 9.9% in February, from 9.7% in January. Inflation related to fuel & power declined to 6.5% in February, from 7.1% in January. Inflation for clothing and miscellaneous items remained steady at around 10% and 7 %, respectively.