GAS WARS: CRONY CAPITALISM AND THE AMBANIS

by Paranjoy Guha Thakurta

  The relationship between the Indian government and the Ambanis reflected new vistas of the intertwining of business and politics. The closed nature of the Indian economy at that time permitted the government to exercise control over economic activities. From the early 1990s onwards, the government’s policies of liberalisation weakened its ability to control privately-owned corporations. What continued from the days of the centrally controlled Indian economy, however, was that loopholes in the law and in the fine-print of rules were deliberately created by senior bureaucrats at the behest of their political masters to assist industrialists who would then, in turn, covertly fund the election campaigns of politicians. While an influential few among India’s corporate captains successfully exploited this business- politics nexus, the less well-connected barely survived. The state—the government of India led by representatives of the people—became relatively weak and often turned a blind eye as bureaucrats played favourites in disbursing business opportunities.

  In the days of the licence raj, Dhirubhai Ambani, more than most of his fellow industrialists, understood the importance of ‘managing the environment’, a euphemism for keeping politicians and bureaucrats happy. He made no secret of the fact that he did not have an ego when it came to paying obeisance to government officials, whether secretaries to the government of India or lowly office attendants or peons. Dhirubhai did not subvert the process; he just made the best use of it. Even before he began his industrial career, Indian politicians had been known to curry favour with businessmen. Licences and permits would be farmed out in return for handsome donations during election campaigns. By the time the Reliance group’s fortunes were on the rise in the 1980s, the Indian economy had become more competitive. It was now insufficient for those in power to merely promote the interests of a particular business group; competitors too had to be shown their place. That is precisely what happened to rivals of the Ambanis, and this was an important new dimension to the nexus between business and politics.

  Few today remember a company called Swan Mills or, for that matter, Kapal Mehra, who headed a corporate group named Orkay, and who was raided by tax personnel and jailed. Another business rival of the Ambanis, Nusli Wadia of Bombay Dyeing, became a pale shadow of what he might have been had his entrepreneurial ambitions been fulfilled. Even the undivided family headed by the late Ram Nath Goenka, with its then control of the Indian Express chain of newspapers, which conducted a relentless campaign against the Reliance group in 1986–87, split into three factions after his death. It is difficult to establish the hand of the Ambanis behind the trifurcation of the Express group but they were certainly not unhappy at this development. Individuals who were part of the Reliance group did not merely track the break-up of the newspaper group but were proactive in feeding journalists (including one of the authors of this book) important information about the Express group which also included a letter written by Saroj Goenka (Ram Nath Goenka’s daughter-in-law and cousin of Ashok Jain, who headed the rival Times of India group) to the then prime minister of India P.V. Narasimha Rao, urging intervention in the Goenka family dispute.

  A popular joke of the 1980s started with a question: Which is the most powerful political party in India? Answer: the Reliance Party of India. Dhirubhai’s supporters were not confined to those affiliated to the Congress (notwithstanding his proximity to Indira Gandhi), but cut across party lines. Few had the gumption to oppose the Ambanis, just as the overwhelming majority of journalists preferred not to be critical of Reliance. The Indian media, as a rule, lapped up whatever was doled out by the group’s public relations executives. The bureaucracy too, by and large, favoured the Ambanis, and not merely because many babus had got accustomed to receiving lavish hampers on Diwali.

  Around 1986, the policy tide turned against Dhirubhai for a brief period. Several events and personalities were responsible for this swing in his fortunes. Rajiv Gandhi, who became the country’s prime minister after his mother’s death, was reportedly not exactly enamoured of the Ambanis. His then lieutenant, finance minister Vishwanath Pratap Singh (who went on to succeed Rajiv Gandhi as prime minister in December 1989) almost obsessively took on Indian businessmen for their corrupt and illegal practices. To further their own interests, as already mentioned, corporate rival Wadia and media baron Goenka joined hands to put a spoke in Dhirubhai’s relentless race for growth.

  The result was one of the most vengeful, no-holds-barred corporate clashes India has ever witnessed, a battle that engulfed the entire polity and possibly contributed to the fall of at least one Union government in New Delhi over the next few years. No one, be it in politics, business, the media, academia, and civil society could ignore this debilitating conflict. It directly or indirectly impacted virtually everyone of significance in India’s corporate world. In those years, one was either with the Ambanis or against them (that is, on the side of the Wadia-Goenka combine). Few could have imagined then that a similar corporate battle would be fought over a decade and a half later, from late-2004 onwards, and that this time the antagonists would be Dhirubhai’s own two sons, Mukesh and Anil.

  In his column in Hindustan Times (16 August 2009), journalist Vir Sanghvi compared the two rivalries. He wrote how Mukesh Ambani ‘with his Congress links’ was playing the role of his father Dhirubhai while his younger brother Anil was playing Wadia’s role. Sanghvi wrote: ‘Like Wadia, he (Anil) has friends in the BJP (he thinks [Gujarat chief minister] Narendra Modi should be prime minister) in UP (Uttar Pradesh) politics (just as V.P. Singh backed Wadia so Mulayam Singh [Yadav] is backing Anil)….’

  The columnist added that just as Wadia was ‘consumed by his mission to destroy Dhirubhai, Anil seems consumed by a desire to destroy (his older brother) Mukesh… Wadia would attack Congress ministers for their closeness to Reliance; Anil is doing the same. Wadia would hire lawyers such as Ram Jethmalani; Anil has done the same thing.’

  Anil, of course, sent a legal notice to Sanghvi for drawing this comparison between him and Wadia but nothing much transpired thereafter. And, for the record, Mukesh too is close to Narendra Modi.

  History repeats itself, but in the case of the Ambanis, so did the histrionics. The Ambani brothers waged a war against each other with the same tools their father had honed and perfected over decades, and had used successfully against adversaries like Wadia. Hardly anyone in India’s influential circles was insulated from this Ambani versus Ambani feud, and almost no one remained neutral. Most politicians, bureaucrats, businessmen, journalists, and academicians took either a pro-Mukesh or a pro-Anil stance, even if they disliked both brothers, when the public squabble between the brothers was at its peak during 2008 and 2009.

  During those years, ministers, especially the then petroleum minister Murli Deora, were publicly criticised by Anil and opposition leaders, especially from the Samajwadi Party, for allegedly siding with Mukesh. In a characteristic whisper campaign reminiscent of the Ambani-Wadia battle of the late-1980s, Mukesh’s camp said that the ministry of power was favouring Anil. Similar allegations were levelled against officials in the Prime Minister’s Office (PMO); in ministries such as petroleum, power, telecommunications; and in the Planning Commission. Retired bureaucrats voiced arguments for and against the two siblings. Former heads of public sector undertakings, like the power behemoth NTPC and the oil exploration major ONGC did the same through letters, interviews, private parleys, and discussions, on- or off-the-record.

  The media too was divided; a few publications played the double game of supporting both brothers at different points in time. Mud was thrown at the judiciary, although there was no apparent evidence of bias. In effect, all the four pillars of Indian democracy, the four estates, were embroiled in this unprecedented war of words on account of a tussle between two corporate czars, each wanting to finish off the other in a race to gain control over the country’s resources, namely, the natural gas found beneath the ocean bed of the Bay of Bengal.

  There were indeed many issues including personality
conflicts and the fight to control the undivided family’s assets that led to the sibling rivalry becoming public. An uneasy truce was declared in May 2010. But the most important reason why Mukesh and Anil had fought bitterly was to control access to the country’s gas resources from the KG basin. When Anil accused Deora of favouring Mukesh, the minister promptly dragged the government into the issue and contended that gas was national property and therefore only the government had the right to determine its price. The implicit assertion was that the government was the unbiased and impartial custodian of the resources that belonged to the people. Anil argued that Deora’s claim was incorrect, and that his actions were aimed only at helping Mukesh by undermining the private agreement between the two brothers.

  The dispute was about who owned the gas, the Ambanis or the government, and therefore, who would have the right to fix the price of gas. Ownership would also influence to whom Mukesh’s company could sell the gas, and in what quantities. For Anil, it was a do-or-die battle. To scuttle Deora’s (and by insinuation, Mukesh’s) plans, the prime minister was brought into the picture. News reports based on briefings by sources close to Anil stated that prime minister Manmohan Singh was concerned about the fallout of the sibling rivalry on the country’s investment climate. As a result of a diktat from the prime minister, Deora was reportedly forced to stay away from the conflict. Moreover, to bolster support for Anil, the issue kept cropping up in Parliament through politicians and parties friendly to him. Frenzy was generated in the mass media, and the dispute hogged headlines to keep up the pressure on legislators and policymakers.

  The dispute had its fallout in mid-2008, when prime minister Manmohan Singh was frantically defending in the Lok Sabha (lower house of India’s Parliament) a no-confidence motion against his government over the India-US nuclear agreement. He was battling fierce opposition from Left MPs (on whom the government depended for a majority in the Lok Sabha), a section within his own party, the Congress, and from some of its partners in the ruling United Progressive Alliance coalition. Manmohan Singh realised that support for the nuclear deal with the US would be decided on the floor of the House but, given the combined strength of the Opposition, the numbers in Parliament didn’t stack up comfortably in favour of the UPA.

  That was when Amar Singh, then general secretary of the Samajwadi Party (SP), assured the prime minister of his help. First, Amar Singh got his party chief Mulayam Singh Yadav and the party’s MPs to vote in favour of the United Progressive Alliance (UPA) government at the Centre. Thereafter, he initiated moves to woo independent MPs and even others belonging to parties that were against the nuclear deal, urging them to break ranks. Rumours flew fast; money apparently played an important part in this game, which was eventually won by the UPA on 22 July 2008 in a nail-biting finish. The point to note here is that Amar Singh and Mulayam Singh were close friends of Anil. In a television interview, Amar Singh disclosed how Anil had postponed the shareholders’ meeting of his company at the last minute, thereby incurring a huge loss, so as to visit him when he was unwell.1

  During the debate on the motion, BJP members walked into the Lok Sabha with wads of currency notes claiming they had been sought to be bribed to switch sides or abstain from voting. A parliamentary committee headed by Congress MP V. Kishore Chandra Singh Deo decided that there was inadequate evidence against Amar Singh and Ahmed Patel— political secretary to Congress President and UPA chairperson Sonia Gandhi—against whom attempts to bribe were levelled by BJP MPs, and a criminal case was eventually instituted. However, even before the MPs voted on the motion on 22 July 2008, Amar Singh thought the political iron was hot enough to strike, to help his friend, Anil, and target the latter’s enemy, Mukesh. He presumed, without any explicit or implicit guarantee, that the role played by the Samajwadi Party in ‘saving’ the government would ensure a favourable policy regime for Anil. He dashed off a series of letters to the prime minister which, not surprisingly, promptly found their way to journalists.

  In one such letter, the then general secretary of the Samajwadi Party urged the government to impose a ‘windfall tax’ on private refiners, including Mukesh’s RIL. A windfall tax was a policy tool to prevent refiners from earning ‘super-normal’ profits in the event of a rise in global crude oil prices, and therefore those of petroleum products like petrol, diesel, and liquefied petroleum gas (LPG). Such a move would have seriously dented RIL’s profits and reduced its stock market valuation. The idea of imposing a windfall tax had been mooted by Anil Ambani in mid-2007 at a meeting with the Union government’s committee of secretaries. In its presentation, Anil’s Reliance Energy had stated that ‘internationally, governments have renegotiated production contracts/concession agreements (of oil and gas) and/ or levied windfall tax whenever the financial equilibrium under the contract has [been] disrupted due to an unforeseen fundamental change of the major circumstances such as high oil and gas prices….’ The company’s presentation quoted a 2007 Wood Mackenzie report, which stated that renegotiation of production contracts had helped the governments of nine countries, three of which, Algeria, Ecuador, and China, had levied a windfall tax thereby mopping up a sum of Rs 16,50,000 crore or the equivalent of $400 billion at the then prevailing exchange rates.

  Amar Singh was, in fact, in war mode. He alleged that ‘one particular corporate group [was] trying to poach his party MPs for the benefit of the BJP-Left-BSP (Bahujan Samaj Party) combine’. He alleged that this business group had provided bagfuls of cash in a bid to buy the Samajwadi Party MPs and induce them to join hands with those opposed to the government. He didn’t stop there: he virtually pointed a finger at Mukesh and RIL, by alleging that although this group was close to the Congress, ‘one must not ignore its presence in Narendra Modi’s Gujarat or the influence the [Gujarat] Chief Minister has on its psyche’. The fact that RIL’s plants are located in Gujarat and that Mukesh Ambani has publicly lavished fulsome praise on Modi is widely known. Mukesh was, incidentally, not alone in praising Modi. In January 2009, at a public meeting of businesspersons in Ahmedabad, capital of Gujarat, Anil too had gone to the extent of publicly stating that Modi had the potential of becoming a future leader of India.

  Sensing that his younger brother was gaining an upper hand in the ongoing political shadow-boxing, on 14 July 2008, Mukesh separately met prime minister Singh, finance minister Chidambaram and petroleum minister Deora. He explained that the idea of imposing a windfall tax was based on an erroneous assumption that refiners made windfall profits every time the prices of crude oil and petroleum products rose. He added that refining, like many other businesses, was cyclical in nature and that profit margins were likely to get squeezed in the near future even if crude prices remained high.

  After news of the meeting between Mukesh and the prime minister became public, Amar Singh added a twist to the tale. ‘Anil and Mukesh don’t just represent their respective corporate groups but also represent the economic hub of the country,’ said Singh. He added that ‘in the circumstances, a senior person like the PM should intervene’ to resolve the issues between the two brothers.

  The Left parties trained their guns on the prime minister. The politburo of the Communist Party of India-Marxist (CPI-M) said that ‘corporate houses are openly in the fray to lobby their interests in the run-up to the confidence vote’. The Communist Party of India (CPI) stated that ‘for the PM and the PMO to get embroiled in a corporate fight marks the beginning of a dangerous trend. This grossly demeans the PM and his office.’

  Manmohan Singh denied the allegations. The PMO clarified that the prime minister was not working for a patch-up between the Ambani brothers, and issued a statement that asserted: ‘[The] people of India know Manmohan Singh better than to believe that he would get involved in corporate affairs…. the PM meets corporate leaders all the time to discuss the national economic issues as any leader of a modern economy would.’

  When the UPA sailed through the confidence motion with help from the Samajwadi Party, the match seemed
to be fixed in Anil’s favour. This prompted Canada-based market research firm Oxford Analytics to observe that ‘while Anil’s political links may strengthen his position against his brother at present, his business interests will be vulnerable if the opposition BJP returns to power’. For astute observers, these events had larger implications. ‘The struggle between the Ambani brothers threatens to exert a serious impact on the economy.... The rivalry between the two brothers has… begun to affect national politics…,’ the Oxford Analytics report added. Later events, however, indicated that neither Anil Ambani nor Amar Singh gained from the murky episode. As already stated, Amar Singh had to leave the Samajwadi Party in 2010 and was jailed the following year.

  The situation became quiet for a while as political parties prepared for the 2009 general elections. Towards the middle of 2009, the Supreme Court prepared to hear the tripartite gas dispute between Mukesh, Anil, and the government. Anil had to make a few mid-course corrections. He realised that the government which was not allowed to become a party to the legal dispute by the Bombay High Court, could play a greater role in the Supreme Court. The politicking on his behalf by Amar Singh had not yielded results. Worse, he apprehended that the government could derail his legal game-plan by supporting Mukesh’s contentions, which, as subsequent events proved, did indeed happen. By maintaining that the government had the right to fix the price of gas and also select its own buyers, the petroleum ministry could snip through the private agreement signed between the two Ambani brothers in June 2005. It could say that Mukesh was bound to sell the gas at $4.20 per million British thermal units (mBtu), and not at $2.34 per mBtu, and only to those firms decided by the government rather than to Anil. Anil had decided he would fight it out and made Deora his prime target. He continued to be adequately aided in this endeavour by Amar Singh and Mulayam Singh Yadav.