With the environment ministry also under his belt and with Moily believing that there were no conflicts of interest in the same person holding both ministerial portfolios, he claimed that a ‘fear psychosis’ among bureaucrats and his predecessors was to be blamed for delay in approvals from the environment ministry. He suggested that clearances were delayed because rules are complicated and the competent authority had discretionary powers. ‘You can’t blame anybody. The environment is such that there is a fear psychosis, particularly after 2009, created because of the CAG reports, court verdicts, court proceedings. There are issues like the National Green Tribunal, CBI inquiry. Not only on this (environment) thing, but all matters,’ he said.
Perhaps only Moily could be as brazen as he was. By 13 January, in less than three weeks as environment minister, he had reportedly approved the establishment of projects worth Rs 1,00,000 crore. He was apparently clearing between 80 and 100 pending files every day! in one sweep, he cleared the controversial steel plant project in Odisha being set up by South Korea’s Posco envisaging an investment of Rs 54,000 crore, the biggest ever single foreign direct investment in India bigger than even BP’s investment in RIL. Other large projects approved by Moily included a 2,800 MW nuclear power project at Gorakhpur, Haryana, with an investment of Rs 23,000 crore and a 800 MW hydro- electricity power project in Arunachal Pradesh with an investment of Rs 6,000 crore, besides projects in the coal and petroleum sectors.
Moily, the PM’s blue-eyed boy and smooth-talking troubleshooter, used to be derogatorily described as ‘Oily Moily’ long before he became petroleum minister. Profiling his rise in Outlook magazine (21 October 2013), Lola Nayar wrote that this nickname was coined after Moily, then a young legislator in 1984, was accused by an independent member of the legislative assembly of Karnataka C. Byre Gowda of offering him a bribe of Rs 2,00,000 to defect to the Congress party. A sting operation was conducted by Gowda and recorded tapes were released resulting in a setback to Moily’s image as a bright legislator who had been handpicked and groomed by the state’s then chief minister Devaraj Urs. He had been made junior minister within three years of being elected to the assembly and first made minister for small industries (1974–77) and then minister for finance and planning (1980–82). Between 1983 and 1985, he was leader of the Opposition in the Karnataka. For five years after the sting operation, Moily was sidelined. He became the Karnataka government’s minister for law, youth service, culture, information, parliamentary affairs and education between 1989 and 1992 before becoming the state’s chief minister for roughly two years.
A lawyer by profession and a loyalist of the Gandhi-Nehru family, Moily had served on and headed a number of official committees. Former prime minister Indira Gandhi had made him part of a panel that recommended the establishment of the National Bank for Agriculture and Rural Development (NABARD) as part of the Reserve Bank of India. From 2000 for four years, he headed official committees on administrative reforms, including reforms of the country’s taxation and revenue collection systems and between 2006 and 2009, he became chairman of the oversight committee for implementation of 27 per cent of the seats in central educational institutions for those belonging to the ‘other backward classes’ or OBCs. He thereafter served in important positions in the Union government in Delhi holding the power and corporate portfolios, among others. He was law minister between 2009 and 2011 when the Ambani brothers were fighting it out in the courts. As already detailed earlier in this book, the older Ambani sibling Mukesh won the legal battle in the Supreme Court. And, as also already mentioned, in October 2012, Moily replaced Jaipal Reddy as minister for petroleum and natural gas under controversial circumstances.
Moily took questions from Outlook’s Nayar on 9 October after he had taken the Delhi Metro to reach his office as part of his drive to promote fuel conservation and help cut India’s massive oil import bill. The minister did not answers questions relating to his son Harsha Moily, who was associated with organisations that received funds from particular companies when he was holding the post of minister, corporate affairs. He told his interviewer: ‘I will not be timid in taking decisions while ensuring that the rule of law is abided by,’ while clarifying his statement in context of the controversy relating to KG gas that ‘automatically, technically applying rules is good for you (but) it is not good for the country’. He was at pains however, to explain that he did not mean that ‘the rule of law will be broken...in taking a decision, the interest of the nation will prevail’.
In 1993, Moily had also been named in a chargesheet filed by the CBI in what came to be popularly known as the Jharkhand Mukti Morcha (JMM) bribery case. The then prime minister of India P.V. Narasimha Rao had been accused of engineering defections by bribing members of Parliament, including some belonging to the JMM, in order to obtain the support of a majority of MPs before a vote of confidence. It was alleged at that time that Moily had been deputed by the Congress high command to arrange finances—including obtaining funds from a liquor baron in Karnataka—to help ‘buy’ the support of the defecting MPs. After this controversy, Moily maintained a relatively low profile for a while. Whenever he has not held prominent political positions, he has been a prolific writer of books and plays in both Kannada, his mother language, and in English. Among his many publications are a five-volume treatise on the Ramayana and an English book on India becoming an economic superpower titled Unleashing India.
Besides the prime minister and Sonia Gandhi, Moily was close to the late chief minister of Andhra Pradesh Y.S. Rajasekhara Reddy. Outlook’s Nayar has written that it was probably with YSR’s clout that Moily won the 2009 Lok Sabha elections from Chikballapur near Bangalore after losing three times from Mangalore and Chikmagalur. Ironically, Moily was with YSR when he was fighting against Reliance for Andhra Pradesh to get a larger share of natural gas from the KG basin. According to Ramakrishna Upadhya, a senior editor with DeccanHerald in Bangalore, when Moily was chief minister of Karnataka, he took on ‘big moneybags to reform admission to professional colleges’. However, as far as Reliance is concerned, Moily’s critics claim he has bent over backwards to accommodate the interests of the corporate group and failed to penalise it. The most recent example of such alleged favours was his wholehearted support to double the administered price of natural gas.
RIL has expectedly welcomed the decision to hike the price of gas to $8.4 per mmBtu from 1 April 2014 but preferred to call it only an ‘interim step’. Company spokespersons have invariably argued that the price of gas should be ‘freed’ and determined by market forces. ‘We welcome the adoption of (the) Rangarajan Committee(‘s) formula as a step in the right direction. However, gas sales have to be at competitive arms-length market prices,’ RIL said in a statement. ‘Accordingly, we hope the same momentum is maintained and as per the production sharing contract, gas markets are allowed to develop and transition to market price soon.’
There is no doubt that the higher administered price will benefit RIL as well as ONGC and OIL. On 15 January 2014, the global credit rating agency Standard & Poor’s (S&P) put out a report saying that the government’s decision to increase domestic gas prices would ‘support the companies’ (that is, ONGC’s and RIL’s) high capital expenditure plans... ‘ S&P stated that the new gas pricing mechanism would improve the cash flows and profitability of both ONGC and RIL to varying degrees. ‘We anticipate that the increase in gas prices will significantly improve ONGC’s operating profit by about 20 per cent, compared with 5-7 per cent for RIL,’ it said, adding that the impact on RIL’s profitability is not likely to be as significant given the company’s low gas production of about 13 mscmd. While the government’s announcement reduces uncertainty over future gas prices, S&P pointed out that ‘uncertainty will continue for RIL, given a legal dispute over the government’s ability to increase the gas prices for some of the company’s gas blocks where production has significantly declined’.
The different disputes relating to RIL and the government were ref
using to get easily resolved. The controversies were unwilling to die down.
14
POLITICS OF CRONY CAPITALISM
As the 16th general elections in India approached, the issue of crony capitalism, with specific reference to Reliance Industries Limited headed by Mukesh Ambani and the price of natural gas extracted from the basin of the Krishna and Godavari rivers in southern India, gained considerable political traction. The Aam Aadmi Party and the Left loudly and repeatedly alleged that the Union government was being controlled by India’s richest man with the country’s two largest political parties, the Indian National Congress and the Bharatiya Janata Party, in his pocket. This was why it was argued that the government wanted to double the officially-administered price of gas which, in turn, would result in the prices of electricity and fertilisers going up thereby adding to inflationary fires that have been raging for long. Inflation in general, and food inflation in particular, was arguably the single biggest issue agitating the electorate in India—never before in the history of the country had the prices of food gone up as rapidly as they had between 2008 and 2013, kicking the bellies of the poor, pinching the pockets of the middle classes and also widening the gap between the affluent and the underprivileged in an already highly- unequal society. Not surprisingly, the issues of crony capitalism, gas prices and the favours allegedly granted to those controlling India’s biggest privately-owned corporate conglomerate, could be easily linked and neatly fitted into the political agenda of many of those opposed to the Congress and the BJP.
On 11 March 2014, as the country went into election mode, a bench of the Supreme Court comprising Justices B. S. Chauhan, Jasti Chelameswar and Kurian Joseph started hearing petitions calling for a stay on the gas price increase and cancellation or termination of the government’s contract with Reliance. The petitions had been filed by CPI MP Gurudas Dasgupta, former Cabinet Secretary T.S.R. Subramanian, former bureaucrats E.A.S. Sarma and Ramaswamy Iyer, former Navy chief Admiral L. Ramdas and a non-government organisation, Common Cause.1 Among the arguments forwarded by the petitioners were the serious concerns voiced by the ministries of finance, power and fertilisers on the impact of a higher gas price on the prices of power and fertilisers. The petitioners questioned the government’s justification of why RIL should get the benefit of the new price even before it ‘compensated’ the people and the government for not delivering on its promised output of gas at the existing price. They also argued that a stay on the price increase would enable the newly- elected government to take a fresh view on the different controversies relating to extraction and pricing of gas.
Colin Gonsalves, advocate for Dasgupta, accused RIL of deliberately hoarding gas and said that the drastic shortfall in production needed to be investigated. He said that investments worth Rs 40,000 crore in gas-based power plants in Andhra Pradesh alone had been adversely impacted. These allegations were denied by RIL’s lawyers led by Harish Salve. In a written submission to the court by legal firm Parekh and Company, the company questioned the CAG’s observations by arguing that government auditors had scrutinised expenditure amounting to less than one per cent of the total contract cost being recovered and had arrived at ‘erroneous’ conclusions. It was argued that CAG’s ‘general observations’ on the acquisition process had overlooked the fact that the gas field in question was a deepwater field which was an ‘extremely different field as compared to any other deep sea field in other parts of the world’.
Coinciding with the commencement of hearings in the Supreme Court, RIL issued three fact sheets and power-point presentations for the media which were titled ‘In the court of the people’, ‘KG gas - the flame of truth’ and ‘Why KG gas matters to you’ (reproduced in full in Appendix 10). The company replied to its critics through a series of terse statements. It said it was for the ‘aam aadmi’ (ordinary people) not the Aam Aadmi Party, adding that the ‘basic drive that established RIL as a large empire was driven from the basic principle of fulfilling the needs of the common man—roti, kapda and makaan(bread, clothing and shelter)’. The company took aim at Subramanian by pointing out that the terms of the PSC that RIL signed with the ministry of petroleum and natural gas had been framed in 1997 when he was Cabinet secretary when neither the Congress nor the BJP were in power.
In the meantime, another new case popped up far away from Delhi, in the state where the Krishna-Godavari basin lies. On 10 March, on the basis of a petition filed by Palem Srikanth Reddy, an information technology entrepreneur and convenor of the newly-formed Jana Palana Party, asking for a ‘fair share’ of gas and royalties for Andhra Pradesh, the state’s high court issued notices to RIL, the CBI, the DGH, the state government and the Union government.
The judiciary’s view is crucial. As Dasgupta told Frontline (21 March 2014) in an interview, he had approached the court with a lot of optimism and the judiciary of the country had an important role to play in ensuring probity in public life. ‘Only an investigation under the directions of the court can be impartial. No independent inquiry is possible when the petroleum ministry itself is in connivance with the company,’ he said.
The veteran Communist parliamentarian, who was hanging up his boots after 25 years in the Lok Sabha, was commenting on the efficacy of an investigation into RIL by the Anti-Corruption Branch (ACB) of the Delhi government initiated by AAP’s leader Arvind Kejriwal when he was chief minister of the government of the national capital. In one of the last acts of the 49-day AAP government in Delhi, a First Information Report (FIR) dated 11 February 2014 (see Appendix 11) was lodged against Mukesh Ambani, Union minister of petroleum and natural gas M. Veerappa Moily, former petroleum minister Murli Deora and the former director general, DGH, V.K. Sibal, for alleged conspiracy and collusion to defraud the exchequer. The five-page FIR with annexures was lodged under sections 420 (cheating), 120-B (criminal conspiracy) of the Indian Penal Code (IPC) and the Prevention of Corruption Act. It was filed on the basis of a complaint from four citizens, Subramanian, Sarma, Admiral R.H. Tahiliani, another former Navy chief who is head of the India chapter of Transparency International and lawyer Kamini Jaiswal. Three days after the FIR was lodged, on 14 February, the Delhi government led by Kejriwal government resigned. If anyone had any doubts about its intentions, AAP founder and lawyer Prashant Bhushan made his party’s position clear on 17 February:
It’s clear that the upcoming Lok Sabha election is one of AAP versus Reliance as the latter controls the Congress and the BJP. We are not going to spare Anil Ambani either. We have chosen to focus on Reliance because it’s the epitome of crony capitalism and how it influences policymaking in our country.
Kejriwal wrote to prime minister Manmohan Singh urging him to keep the gas price hike in abeyance till an investigation probe was completed, adding that a higher gas price would make the life of the common man ‘miserable’ since it would have a ‘cascading effect on transport, domestic gas and... electricity prices’. He repeated the allegation that RIL had ‘deliberately’ curtailed production from the offshore KG gas fields to exert pressure on the government to hike the price of gas. Further, he claimed the government had failed to act against RIL even after the CAG pointed out instances of ‘negligence’ on the part of the company.
Kejriwal also claimed that RIL’s partner, Niko Resources of Canada, was selling gas to Bangladesh at $2.34 per unit on the basis of a 25-year contract to supply gas at that rate. He alleged that RIL’s cost of production of an unit of gas was less than a US dollar—$0.89 per unit in 2009–10. He said that the impact of the hike would cost the country a minimum of Rs 54,500 crore every year and allow RIL to make a future windfall profit of up to Rs 1,20,000 crore. RIL denied all these claims. On the cost of production of gas, the company said the figure of $0.89 per unit had been taken from a letter sent by RIL to the DGH (referred to in the FIR) which was not about cost of production but limited to post-production costs between the wellhead and delivery point, which is a small portion of the total cost of gas.
&nbs
p; Speaking at a function organised by the Confederation of India Industry (CII) on 17 February after demitting office, Kejriwal asked:
Why should we get gas at the market price? From our wells, we should get it on the basis of cost, plus some profits. We are against buying of national resources at a low price only to make a huge profit by reselling it in a few days. That is not business, it is loot of the country’s resources. We have to encourage honest business in our country and remove all entry-barriers towards it.
AAP’s Bhushan said that natural resources should be retained with the public sector. He said that the corruption and inefficiency that the public sector is associated with, is a consequence of the government’s own actions. When asked whether the FIR had created a sense of apprehension within the business community, Kejriwal remarked that Mukesh Ambani represented crony capitalism, and that the Ambani brothers ‘do not allow anyone to do business and have taken over everything’. He said: ‘The business community is happy with us. Businessmen, 99 per cent of them, want to do honest business.’
RIL issued a statement describing AAP’s allegations as shocking, completely baseless and devoid of any merit or substance. The company said it was prepared to take legal steps against the Delhi government’s FIR and even file a suit of defamation against the leaders of AAP. Petroleum minister Moily described Kejriwal as ‘ignorant’ and said that he should ‘know how (the) government functions’. He was categorical that the gas price hike was here to stay, and that the government would not backtrack adding that the new pricing regime was based on the recommendations of the Rangarajan Committee that had been set up when his predecessor Jaipal Reddy was heading the ministry. He fumed: ‘I have not changed even a word or a full stop or a comma from the recommendations.’.
GAS WARS: CRONY CAPITALISM AND THE AMBANIS Page 45