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Gas pricing: FIR slams UPA for favouring Reliance

February 14, 2014 17:03 IST

Gas pricing: FIR slams UPA for favouring Reliance

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The first information report of the Anti-Corruption Branch placed before a Delhi court naming Petroleum Minister M Veerappa Moily, Mukesh Ambani and others on gas pricing issue alleged that the Congress-led United Progressive Alliance government ‘favoured’ Reliance Industries Ltd with an eye on 2014 general elections and Bharatiya Janata Party is maintaining ‘silence’ hoping to gain corporate funding for the polls.

"The fact that this decision (to raise gas price) was taken in advance by the present government shows that it wanted to favour RIL for corrupt considerations which would then help with the expenditure for the upcoming national elections.

"This is also the reason why the main opposition party, the BJP, is silent on the issue as during election time, when huge slush of funds is required by the major parties, no one is willing to speak against this decision even though price rise is normally an important political issue," the FIR said.

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Image: Mukesh Ambani, reacts with the image of his father and founder of the company Dhirubhai Ambani in the backdrop during the company's Annual General Meeting.
Photographs: Reuters

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The five-page FIR with which annexures have been attached was lodged by the ACB of Delhi Government on a complaint sent to Chief Minister Arvind Kejriwal by former Cabinet Secretary T S R Subramanian, former Secretary E A S Sarma, former Navy Chief Admiral R H Tahiliani and advocate Kamini Jaiswal.

Besides Moily and RIL chairperson Ambani, former Petroleum Minister Murli Deora, ex-Director General of Hydrocarbons V K Sibal and other unknown persons have been named as accused in the case.

The FIR was lodged under sections 420 (cheating), 120-B (criminal conspiracy) of the IPC and under provisions of the Prevention of Corruption Act.

The complaint, on the basis of which the FIR was lodged, alleged that impact of gas price rise would cost the country a minimum of Rs 54,500 crore (Rs 545 billion) per year at current dollar price.

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Image: Arvind Kejriwal.
Photographs: Reuters

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However, Moily on Friday said the government will not go back on its decision to hike rates from April 1 and came down heavily against Kejriwal for ordering an ‘unconstitutional’ FIR against him and others for raising gas prices.

RIL too had termed the ordering of FIR against it as shocking and described the complaints that were used to base the action as baseless and devoid of merit or substance.

"A contract dated April 12, 2000 was entered into between the Union of India and RIL and Niko Resources Ltd called a production sharing contract for the exploration for natural gas and in case of any commercial discoveries, the development and the production of natural gas in the contract area identified as block KG D6," it said.

In the complaint, they alleged RIL had signed a contract with NTPC in 2004 to supply gas for its power plants at 2.34 dollar per mmbtu for a period of 17 years and it also signed an agreement with RNRL of ADA Group to supply the gas at the same price for 17 years.

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Image: Nita and Mukesh Ambani.
Photographs: Reuters

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"However, RIL went back on its word and refused to supply the gas at that rate which was clearly profitable for RIL," it said.

"Under RIL's pressure, the government, with Murli Deora as minister, revised gas price in 2007 to $ 4.2/mmbtu which was clearly malafide and an act of corruption," it alleged.

It also said the Supreme Court in 2010 held that price fixed by the government would be binding on all the parties.

The complaint also said that cost of production of gas is much less than 2.34 dollar per mmbtu and also referred to a May 22, 2009 letter written by RIL to Directorate General Hydrocarbons giving its cost calculations which shows that "the cost of production is less than 1$ per mmbtu."

"This shows that the demand for an increase in gas price is only an indication of RIL's greed and its malafide designs.

Also BP (British Petroleum) must have seen high returns from a known discovery at the current price of $ 4.2/mmbtu and thus, it invested about Rs 33,000 crore (Rs 330 billion) for 30 per cent stake in RIL's KG basin block," the complaint said.

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Photographs: Reuters

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The complaint said the decision to increase the gas price from 4.2 dollar per mmbtu to 8.4 dollar per mmbtu, which would come into effect from April 1 this year, is the "single biggest act of corruption done by the United Progressive Alliance government".

Giving details on the issue, the FIR said that the KG-D6 block, with a contract area of 7,645 square km, was awarded in first round in 2000 to a consortium of RIL, the operator, and Niko Resources Ltd with 90:10 participating interest. (reopens LGD 14).

The FIR also said that after doubling of the rates, the gas price in India will become one of highest in the world.

The cost of production at the well-head was ‘never calculated’ by the government or the Rangarajan Committee, which was appointed to look into the issue of gas price hike, it said.

"No attempt was made to determine cost of production accurately and independently. No attempt was made to study such cost of gas at the well-head internationally," it alleged, adding, "there is no explanation as to why when the entire domestic production is consumed internally, the price was fixed in US dollars."

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Image: A view of the decorated central hall of the Indian parliament.
Photographs: B Mathur/Reuters

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It also alleged that PSC does not permit a revision in the price of natural gas once the field has been declared commercial and this field was declared commercial at 4.2 dollar per mmbtu.

It also claimed that RIL's partner NIKO has a 25 year contract with Bangladesh Government to supply gas at the rate of 2.34 dollar per mmbtu.

"The government is therefore only giving a windfall to the current contractor RIL at the cost of the common man and the taxpayers.

"Thus, RIL would be benefitting from its non-performance and deliberate drop in production," it claimed.

It said, "it is thus clear that this is a mega-scam and that systemically benefits have been bestowed upon RIL by the Central government, especially by Ministers like Veerappa Moily and Murli Deora and officers like V K Sibal which have caused defrauding of the nation and have caused a great harm to public interest."


Image: A worker at a gas plant.
Photographs: Reuters

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