It began with a quiet request, followed by an appeal. On 15 July, Anil wrote to the prime minister stating ‘you may direct the petroleum ministry and the other relevant departments to cease from overtly and covertly attempting to intervene in our commercial dispute with RIL’. The letter was written after Deora made a public statement that the gas from the KG-D6 basin of RIL belonged to the government, and not to either Mukesh or Anil Ambani.
Anil upped the ante at the shareholders’ meeting of Reliance Natural Resources Limited (RNRL), held at the Birla Matoshree Auditorium in south Mumbai on 28 July 2009. He alleged that the petroleum ministry was abetting the ‘plain and simple greed’ of RIL. ‘It is evident that the biased stance commenced in 2006, coinciding with the changes in the ministry,’ he said. The change that Anil was referring to was Deora replacing Mani Shankar Aiyar as the petroleum minister in January that year.2
Anil went on to allege that that the petroleum ministry had acted without consulting the rest of the cabinet and claimed that the ministry’s stand on the production sharing contract relating to extraction of KG gas was contrary to the decisions taken at the EGoM meetings and, according to him, the EGoM ‘represented the broader, collective wisdom of several other ministers, including, inter alia, the ministers of finance, law, power and fertilizers’. One view expressed in the EGoM was that the terms of the contract were skewed in favour of RIL and against the interests of the government; this view was subsequently endorsed by the Comptroller and Auditor General of India.
RNRL’s shareholders cheered their chairman and the atmosphere was emotionally charged. When Anil criticised the petroleum ministry, investors shouted: ‘Anil Ambani aage badho, hum tumhare saath hain(Anil Ambani forge ahead, we’re with you).’
The following day, 29 July, the Samajwadi Party MPs raised the gas issue in the Lok Sabha. Mulayam Singh said that the government was denying gas to power projects in his home state of Uttar Pradesh. The project Mulayam mentioned was the proposed gas-based power plant at Dadri, which was being set up by Anil (and for which Mukesh had promised gas) besides other power projects promoted by the state-owned NTPC. ‘Even [the] government’s own NTPC would also get affected due to this partisan role in supply of gas to UP for power generation. The government should tell us the reason behind not allocating gas to UP,’ he demanded.
Although by this time, gas was being extracted from the KG basin, a proposal to build the pipeline to transport the gas from the coast of Andhra Pradesh to Uttar Pradesh had not made any progress. Parliament was adjourned three times on that day. Finally, the party’s MPs trooped into the well of the Lok Sabha and demanded Deora’s removal ostensibly because he was thwarting attempts to bring KG gas to Uttar Pradesh where the SP’s political base is located.
During the debate, Mulayam Singh said that the petroleum ministry was trying to benefit ‘one individual’ (meaning Mukesh Ambani) and that the SP was only worried about the fate of power projects proposed to be set up in UP, and not about the differences between the Ambani brothers. He also alleged that Deora was acting as ‘Mr Moneybags’ for the Congress party. At the forefront of the action in Parliament was Amar Singh, who had earlier wondered whether Deora was a corporate honcho or a minister, and how he could have been given the petroleum portfolio as he was close to both Mukesh and L.N. Mittal, head of the global steel conglomerate, Arcelor-Mittal, both of whom had major business interests in oil and gas.
Over the next couple of days, Anil gave several interviews to newspapers. As reported in Times of India (30 July 2009), he said:
I am also concerned that the petroleum ministry’s stance is, in effect, that it will solely decide who should sell gas, to whom, at what price, in what quantity, and when…. In a complete reversal of the entire direction of economic reforms being implemented
… the petroleum ministry is regrettably pursuing a different path, seeking perhaps a return to the command-control elements of the dismantled licence-permit raj.
Journalist-commentator M.J. Akbar, took up cudgels on his behalf. In his column in the Times of India (9 August 2009), he recalled what had been written by Australian journalist, Hamish McDonald, in an unauthorised biography ‘of a great, but occasionally errant, genius’ entitled The Polyester Prince: The Rise of Dhirubhai Ambani (Allen & Unwin, Australia, 1998). In the book, there are several references to Dhirubhai’s proximity to Deora, described by Akbar as the late tycoon’s ‘first ally in politics’. McDonald had written:
After getting on his feet back in Bombay, Dhirubhai used to make frequent trips to New Delhi. He frequently went in the company of Murli Deora, a fellow yarn trader who was then working his way up the Congress party machine in Bombay .... Dhirubhai and Deora used to catch an early flight up to Delhi, and park their bags with a sympathetic clerk at the Ashoka Hotel while they did their rounds of politicians and bureaucrats to speed up decisions on import licences.
The suggestion was evident: Akbar hinted that Deora was a biased party in the gas dispute.
The final nail in Deora’s coffin was sought to be driven by Anil through a high-profile, nationwide advertising campaign spread over a week. The advertisements, summarising Anil’s views in rhetorical bullet-points, were splashed across the front pages of major newspapers. The campaign lasted nearly a week and reportedly cost RNRL Rs 15 crore. Issued in the ‘public and national interest on behalf of 8 million shareholders of Reliance Anil Dhirubhai Ambani Group (or ADAG, formed after Anil’s separation with his elder brother), the largest shareholder family in the world,’ one of the advertisements stated that the government was helping Mukesh earn ‘super-normal profits of Rs 50,000 crore,’ (or around $10 billion) and that the petroleum ministry was acting against the country’s interests and those of the consumers. All the advertisements ended with an accusatory question: ‘Is this in public or national interest?’
The fifth advertisement in the series alleged, ‘the Petroleum Ministry has intervened in a commercial dispute over gas supply between two corporates, and its stand supports the KG-D6 monopoly gas producer, Reliance Industries’. The fourth one had claimed:
… in contrast to a nearly 80% collapse globally, the gas price the Petroleum Ministry wants the Indian fertilizer and power sectors to pay Reliance Industries has shot up by a shocking 20% in a year. Typically, the government intervenes to either bring down consumer prices or increase its own revenues. The Petroleum Ministry’s actions unfortunately do neither. Its intervention has only hiked gas prices; government revenues are unchanged, and surprisingly, the only beneficiary is the KG-D6 monopoly gas producer, Reliance Industries, which will make super-normal profits.…
Political parties claiming no allegiance to either brother denounced the government for getting sucked into the ‘games’ being played by the Ambani brothers. Thirty MPs from the Left parties even implored the prime minister to take over Mukesh’s gas-fields and urged that a government entity like the public sector GAIL (formerly Gas Authority of India Ltd) should market and distribute the gas produced. It had by then become impossible for the prime minister to publicly distance himself from the controversy. On 21 August 2009, the Times of India carried the following report:
[The] PM is learnt to have suggested to the warring brothers that they should make serious effort to reach a ‘middle ground’ over the KG gas dispute—in other words, search for an amicable settlement. Singh is said to have explained to the brothers that their businesses are very big now and that if one were to keel over, it would end up hurting the business environment of the entire country. It was therefore important to look for a middle path. [The] PM is of the view that there was a need to take a neutral and detached view of a very heated and emotional battle. Singh has put the point across on more than one occasion that apart from the specific merits of the KG gas case, there is a need to get the Ambanis to bury their hatchet.
However, the following day, this report was denied through the PressTrust of India news agency. The PTI report said that the ‘PM is not interven
ing or mediating in the Ambani brothers’ gas dispute, though he believes that the top two industrialists should patch up in national interest. Reports in a section of press were not true that Singh has suggested the two brothers to follow a middle path to resolve their ongoing dispute.’
Deora quickly tried to distance himself from charges of favouritism. He clarified that he was a friend of the late Dhirubhai and therefore treated both his sons the same way, having known them from their childhood. To buttress this point, he told Outlook(8 July 2002) that he had met both Mukesh and Anil, and ‘these days I meet Anil more often’. In August 2009, a profile of Deora in Business Standard stated that although he may be closer to Mukesh, ‘it has not stopped Anil from walking into his house for dinner and then asking his domestic help for a special cup of tea—as if it were his own house’. It added that the petroleum minister would not allow anything to come between the two different, and even contradictory, friendships. For example, at the height of the war between Dhirubhai Ambani and the Nusli Wadia-Ram Nath Goenka combine, Deora continued to play bridge with Goenka at his Mumbai penthouse and Wadia was present at the wedding of Dhirubhai’s daughter. The message seemed to be that Deora wouldn’t dilute his relationship with Anil to help Mukesh.
At different times during the months of July and August 2009, the minister said, ‘I feel anguished and deeply hurt. There are problems in every family but this has left things in a very bad taste. All I can say is that this is very unfortunate. I will be happy if the two brothers sort out the dispute.’ He said that despite his relationships with both the Ambanis, things had gone beyond his ‘interventions’. He felt that events had taken a turn that was beyond the government’s imagination, especially after the Bombay High Court judgement of June 2009 which ruled in favour of Anil. As was expected, the point that Deora repeatedly made was that ‘gas does not belong to either Mukesh or Anil Ambani. The gas belongs to the government.’
The fact is that the oilfields and gas-fields had been leased out by the government to private operators like RIL under the NELP. There was a mechanism in place for sharing the profits and the gas/oil. Therefore, when Mukesh decided to sell gas to Anil at a fixed price, and the Bombay High Court stated that the contract between the two Ambani brothers was binding, the government woke up. What now dawned upon it was that if the Ambani agreement was permitted, then other private operators who had been granted exploration licences could sell the oil and/or gas to their affiliates, friends, relatives, or anyone else at whatever prices they wanted, which might or might not be related to prevailing market prices. More important, the gas could be sold without any reference to allocations to priority sectors specified by the government.3
The then petroleum secretary R.S. Pandey wondered aloud whether the agreement between RIL and the petroleum ministry implied that the former was free to price any future gas that was found, and if so, then what would stop Mukesh from transferring the gas to his own refineries and petrochemical plants at, say, $1 per mBtu, thereby making a killing?
On 19 June 2009, Deora told journalists in his office:
We have to keep the interests of the people of India in mind and the sovereign rights over natural resources. The gas belongs to the people and I would make every effort to protect the nation’s interest. The government will take steps which are in the best interest of the nation.
He added that this was why the government had decided on the selling price, as well as the priority allocation to various sectors. Deora reiterated in Parliament on 3 August 2009 that the government had nothing to do with the private dispute between the Ambani brothers and had everything to do to protect the interests of the government and the public. ‘The government will make all endeavours to protect the legal rights to regulate utilization and allocation of gas.’
He reminded the MPs that in accordance with the current government’s gas utilization policy, the priority sectors were urea plants, existing power units, existing LPG plants, city gas-distribution projects, gas-based steel plants, and captive power units, in that order, and these had precedence over any new consumers such as Anil’s proposed power plant at Dadri in UP. More than three weeks later, Finance Minister Pranab Mukherjee agreed with Deora(Indian Express, 27 August 2009).
In the gas issue after the Bombay High Court judgment, I asked the law officers: “Will it, one, affect the government’s interest in determining the allocation of gas as per its priorities and, two, in determining the price?” They said it may. Then I suggested that we must take the clarificatory remedy from the highest court. That is the sole objective. I have no intention in settling the disputes between the two warring factions.
He added that Anil’s advertising campaign, which attacked the petroleum ministry, should not have named Deora. ‘He has done his job, what he felt would best serve the interests of the country. He has done nothing to invite this criticism.’
That very day (26 August), Mukherjee, like Deora, acknowledged his friendship with Dhirubhai but distanced himself from the dispute between the two brothers. This is how he was quoted in the IndianExpress (27 August 2009):
I knew the late Dhirubhai Ambani very well from the 1970s on (wards). I saw the boys growing up. Because they are sons of Dhirubhai, it is very difficult for me to make a distinction between the two. And I am not the competent person. There should be somebody else (to mediate). They are much bigger than what they were in the ’70s … and that is why the PM himself has said that both of them should try to sort out their issues.
The political circus remained engrossing. Senior cabinet ministers were at pains to admit their close relationship with a businessman (Dhirubhai) and, at the same time, reiterate that they had little personal interest in the skirmish between his two sons. Observers thought that the issue was about the ownership of a country’s natural resources. Private firms of analysts made their own observations. Eurasia Group of London stated: ‘If a private MoU can involve something that belongs in the public domain, it gives the sense that large corporations can bend rules and influence policy – that’s surely got to be the biggest political risk.’ A report prepared by investment consultancy firm KRIS added that the government’s position on the dispute ‘could make investors wary’ besides sending ‘a message that the law is different for different people’. A report by another firm, Macquarie, concluded that this ‘may dissuade further exploration and exploitation of India’s mammoth upstream [gas exploration] potential’.
On 6 August 2009, Deora clarified that the gas price the government had fixed was not high. He said that the price of $4.20 per mBtu was not just cheaper than the price of gas supplied by other private firms in India, but also lower than the prices of alternative fuels such as naphtha, furnace oil, and liquefied natural gas. He dismissed the CPI-M’s call for nationalisation of the RIL gas-fields and said ‘the old days of nationalization are over’ and ‘even your Chief Minister (chief minister of West Bengal, ruled then by the Left Front and led by the CPI-M) does not talk about nationalization.’
Deora tried to assuage the feelings of Mulayam Singh, Amar Singh, and their party MPs. He told Parliament that Anil Ambani’s proposed power plant in Dadri will not be starved for gas. ‘The intention of the government is very clear. We will allocate gas to the Dadri project subject to availability, and the plant will be treated on the same footing as other plants placed under similar circumstances.’
RIL completed the government’s defence when it claimed that it would not earn ‘super-normal profits’ of Rs 50,000 crore at a gas price of $4.20 per mBtu. At the same time, the company claimed that Anil’s power project would stand to gain an additional profit of Rs 3,50,000 crore if the price of gas was fixed at $2.34 per mBtu. The reason advanced was that as the Dadri plant had not been completed, Anil would trade in gas: buy from RIL and sell it at higher prices to third parties, and earn an extra Rs 21,000 crore a year for 17 years (the supply period mentioned in the Ambani agreement). For many observers, what seemed downright venal was that Mukes
h and Anil were fighting only to earn huge profits at everyone else’s expense.
That the battle between the Ambani brothers had become extremely acrimonious had been evident even earlier. On the morning of 23 April 2009, a team of seven people, including technicians and maintenance employees of Air Works, an aircraft maintenance firm that has contracts for several private planes owned by Indian businessmen, began an inspection of a seven-seater Bell 412 chopper which was used for non-scheduled operations and belonged to the Anil Ambani group. Till that afternoon, when the group broke off for lunch at the Santa Cruz airport in Mumbai, it was business as usual. There was no whiff of any criminal controversy in the air. They came back later for some final touches. One employee, Palraj Thevar, placed a ladder on the side of the chopper while another, Uday Warekar, climbed up.
A police officer was quoted (in Mumbai Mirror, 5 May 2009) as telling journalists later.
No one suspected anything as it was thought that he [Warekar] was cleaning (the chopper). Ten minutes later, the maintenance work was completed. But luckily, (Bharat) Borge, one of the technicians, decided to conduct a final check and found that the cap of the filter neck was not fitted properly. He opened it to set it right and found peanut-size pebbles inside.
Subsequent investigations revealed that there were small pebbles and mud too inside the fuel tank of the helicopter. Experts claimed that if the chopper had flown with them, it would have crashed. Within hours of Borge’s discovery, representatives of the Anil group blamed the incident on corporate rivalry, pointing a finger at elder brother Mukesh.
The mystery deepened a few days later when Borge’s body was found on the railway tracks between Mumbai’s Vile Parle and Santa Cruz railway stations. There was a ‘suicide’ note in his pocket addressed to the investigating officer of the Crime Branch Unit IX of the Mumbai Police, which was in charge of the incident relating to pebbles and mud in the fuel tank of the Bell 412 helicopter. The note reportedly read:
GAS WARS: CRONY CAPITALISM AND THE AMBANIS Page 6