Thursday, September 17, 2009

sibal - mr crony capitalism

The Pioneer's investigation on Thursday on the nexus between RIL and DGH VK Sibal has once again exposed the allegations of crony capitalism in India's bureaucracy. What is perhaps more intriguing is Sibal's reaction to the expose where he brazens it out by saying - so what?

Here is the Pioneer lead story. Judge for yourself:

CVC examining use of RIL facilities by DG Hydrocarbon’s daughters Caesar’s wife must be above suspicion”: The famous saying holds relevance even today, particularly for those who are in public service. But, some just don’t care. VK Sibal, the Director General Hydrocarbons whose extension of tenure is under CVC scanner, is suspected to have taken favours for his daughters — Priya and Sonia Sibal — from Reliance Industries Limited (RIL), the company whose capital expenditure plan for KG Basin was increased from $2.4 billion to $8.8 billion in 2006. Sibal had given the approval for this. In this connection, Sibal had raised a controversy when he declared that, in 2005-06, CAG had approved the capital expenditure of KG D6 fields, a claim the CAG denied stating that no such approval had been accorded.Sibal is to end his tenure on October 31, 2009. But the Minister of Petroleum has recommended two-year extension for him, which needs clearance from the CVC. However, the CVC is in a fix following complaints of Sibal’s proximity with several business contractors whose project clearances were accorded by him.Even while RIL’s request for increasing capex for KG basin was pending before Sibal, the information with The Pioneer indicates that Sibal’s daughters used posh RIL guesthouses in Mumbai extensively for four-five months.As Director General Hydrocarbons, Sibal would not have faced any problem in arranging a guesthouse for his daughters in Mumbai, as all public sector oil companies, including ONGC, IOC and GAIL, have such facilities in the metropolis. But his choice for RIL’s guesthouse raises eyebrows, as it is inappropriate to accept favours from a contractor, who is coming for sanction of his projects.Sonia Sibal stayed at a VIP guesthouse of RIL — Dalal House — from July to November 2005. Dalal House is said to be the erstwhile residence of Nita Ambani. In November same year, Sibal's another daughter Priya Sibal also stayed at Dalal House. Later, from April to July 2006, Priya stayed at another guesthouse of RIL —Trivoli Guest House — at Hiranandani in Mumbai.According to sources, the CVC is also looking into the ‘relationship’ between Sibal and RIL, especially when hands off distance should have been maintained.The matter does not end here. Later, Priya moved out of RIL’s guesthouse and shifted to a spacious 3BHK flat in Avalon at Hiranandani Gardens, Powai. But, the host still remained the same. This is how: RIL acquired a small firm called Whitesnow Trading Private Limited in May 2008 and the flat was bought in the name of Whitesnow in the same month.Whitesnow Trading Private Limited was incorporated in March 2006 by Vijay Dargar and Reena Dargar. After RIL’s acquisition in May, officials of RIL — Nilesh M Mehta and Deepa Sangani —were appointed directors of Whitesnow.Priya's stay in this flat can be proved from the fact that Whitesnow, in a letter dated June 7, 2006, wrote to the apartment asking them "to issue club house ID card to Priya and her family". The demands made by Priya in her e-mail on July 17, 2006 included an LG television and refrigerator and Whirlpool washing machine.The guest was so important for RIL that top notch officials of the company "personally" took care of making her stay comfortable. The supervision of furnishing, furniture and installation of white goods worth Rs 6.5 lakh in the flat was "personally" was done by president of RIL's Oil and Gas Division PMS Prasad and chief financial controller LV Merchant. They approved these expenses also.Sibal has been continuously saying that his relationship with RIL is "only official". These words even found resonance in his reply to Director (Vigilance) Maninder Singh in December 14, 2007. Do these personal care accorded by RIL officials signify the relation being official in any way, as claimed by Sibal?It's altogether a different matter that Priya moved from Avalon after 18 months of stay to another flat in Oshimara, Andheri West, purchased at a cost of Rs 1.7 crore. But for Sibal, the practice of taking favours from contractors seems natural. Unethical it might be, but Sibal continues to avail favours from his contractors. His present residence in Noida is rented to him by a company called Ambience Exim Private Limited. Sibal might like to call this a coincidence, but this company "secured oil and gas block in the Government of India's auction process".VK Sibal: I didn’t favour RIL in exchange.

The Pioneer sought VK Sibal’s response with regard to the allegations. This is his response:“My daughter, Priya was staying in various locations in Mumbai since the year 2001. She was staying in a private accommodation in Kalina, Mumbai, in the year 2005. However, during the floods in Mumbai, the area she was staying got flooded due to which she went missing for 2 days and had to shift to an apartment located on higher grounds for a few days as a stop-gap emergency measure.My daughter Sonia was studying in the Institute of Hotel Management, Aurangabad, during the period 2004-07 and was staying in a hostel.My daughter Priya had a lease agreement with the party for the flat in Hiranandani referred by you for which advance was also paid. An amount of Rs 3 lakh and utility charges of Rs 3,000 per month was paid. She stayed off and on with her friend in the same accommodation. Necessary documentary evidence in support of this is available with us. Notwithstanding the fact that this is a bonafide arrangement, it is surprising that you should allege that favours have been taken from RIL. If these allegations were true, there would not have been any need to pay the advance or the utility charges to the owner. Contrary to your allegation that favors were taken from RIL, a penalty was imposed on RIL during the period October-November 2006 amounting to approximately Rs 89 crore against unfinished work programme in their petroleum exploration acreages, details of which are available with us.I do not understand as to why you should link purely official responsibilities with bonafide personal dealings. I am sure that you can understand the hidden agenda of the people behind these allegations and propaganda. The story has been circulated among the media surreptitiously by vested interests. It is surprising that a well-known newspaper should fall prey to the machinations of a vested interest. Despite the above clarifications, if you still want to publish the story, it will be even more obvious that a section of the media has been pressurised or influenced by an interested party.”

Monday, September 14, 2009

ril's task getting onerous

The waters are getting muddier and muddier for Reliance Industries. In the run up to the SC hearings on the Ambani gas opera beginning from October 20 on Monday, Anil Ambani group firm RNRL fired a fresh salvo seeking to intervene in the NTPC-RIL gas dispute in the Supreme Court (SC), saying the issues raised by the power PSU directly affected its own case against the Mukesh Ambani-led firm. In an intervention application filed with the apex court, RNRL said that RIL's argument, placed by way of an amendment to its written statements in NTPC suit, is an issue in the SLP (special leave petition) filed by RIL in the Supreme Court in the RIL-RNRL matter.

"It is submitted that the issues that arise in the case filed by NTPC in the Supreme Court directly affect its (RNRL's) case against Reliance Industries," RNRL said, adding it was therefore necessary that it was permitted to be impleaded as a party in the NTPC-RIL case. It is clear that RNRL is now using the NTPC intervention as a rump to further its own case. It needs to be mentioned that the basic premise of RNRL's $2.34 per million unit for 17 years is NTPC's gas supply contract with RIL for a similar price and tenure. The same has been validated by the Bombay High Court in its judgment of June 15.

NTPC moved the Supreme Court on September 5, challenging a Bombay High Court decision that allowed RIL to amend its petition on the gas dispute citing the government's pricing policy. A Division Bench of the High Court had allowed amendment in the petition wherein RIL had prayed that the government's gas pricing policy would frustrate its contract with NTPC.

NTPC had moved the Bombay High Court seeking 12 million units of gas from RIL, which had emerged winner in a global competitive bid quoting a price of $2.34 per million unit. RIl has challenged the Bombay High Court verdict in favour of RNRL in the SC.

Sunday, September 13, 2009

ril's illegal levy

Reliance Industries is increasingly getting boxed in. Between NTPC and RNRL's pincer moves, RIL has no room to manoeuvre. Its only fall back being that the cases are pending in SC. NTPC's devastating critique of RIL's malafide intent in not providing gas despite having signed a gas supply agreement has now been followed up by RNRL's attck on RIL charging unauthorised marketing margins.

This is resulting in a potential loss of Rs 10,000 crore to the government in the form of subsidies to power and fertiliser firms. RNRL latest charge is,"RIL's illegal levy of marketing margin is a double whammy. On the one hand the government is denied its lawful share of the additional sales realisation generated by RIL through this levy; and on the other hand the government also has to eventually pay for this additional burden in the form of enhanced subsidy for the fertiliser and power sectors. A shocking case of illegal transfer of over Rs 10,000 crore from government coffers to RIL."

RIL is charging unauthorised marketing margin of 13.5 cents (Rs 6.6) per million unit on the sale of D6 block in KG Basin. The government meanwhile is moving towards protecting its interests in KG Basin gas by giving priority to state owned petrochemical plants and refineries over RIL's downstream facilities. RIL has demanded 20 million units of gas for captive requirement. The government will consider RIL's request only when the allocation of next 40 million units per day is considered.

Wednesday, September 9, 2009

family demerger incomplete as ril plays truant

With RNRL replying to the RIL SLP with a fresh affidavit in the SC, the rules of battle when the court begins its hearing have been spelt out. RNRL has made a very important observation in its fresh affidavit. It says that the supply of gas by RIL to RNRL is an integral part of the demerger of the family business. It also says that that the production sharing contract between RIL and the government gave the former freedom to price and market the gas.

By not giving the gas to RNRL, RNRL is now clearly taking the position that the demerger of the family business remains incomplete and it is well within the purview of the apex court to ensure that this process is completed rapidly. The affidavit filed by RNRL counsel Mahesh Aggarwal has thus raised important questions of the sanctity and legality of the family business demerger.

The affidavit says, "The scheme contemplates that suitable arrangement to be put in place for supply of gas. Until and unless a suitable arrangement is executed, the scheme is not fully implemented and the demerger of the business is not complete." By raising a fundamental question on the validity of the family demerger, RNRL is now asking the SC to enforce its closure. The scheme of demerger has been ratified by the board of RIL of which Mukesh Ambani is chairman, its shareholders and of course the Bombay High Court and yet Mukesh Ambani continues to play truant with the gas supply.

The affidavit also goes on to say that the RIL-RNRL agreement for supply of gas does not affect the government's gas utilisation policy - under the PSC, the supply of gas is not subject to any gas utilisation policy. The petitioners - RIL and the oil ministry - are seeking to misinterpret the terms of the PSC to suggest that any sale of gas has to be in accordance with the gas utilisation policy. Brace yourself for some exciting hearings in the SC.

Sunday, September 6, 2009

tried and tested acolytes try damage limitation

News doing the rounds over the last week or so in capital town is that RIL's man in the Rajya Sabha - MP Parimal Nathwani - is running around trying to do deals on behalf of his master in the run up to the SC hearing fixed for October 20 and beyond. Using the forthcoming Diwali festival as an excsuse, he is trying to provide gifts and such items to various players in the gas opera.

After proclaiming his loyalty to his master Mukesh Ambani on the floor of the house recently, the Gujarat strongman who is chief lieutenant Manoj Modi's brother in law is busy talking up one and all in the capital. Manoj Modi incidentally is running black ops in the Mukesh Ambani camp, though one hears that discredited Anand Jain is also back in the hunt to manage the gas environment. With oil minister Murli Deora keeping a low profile after the PM reprimanded him over his shoddy conduct in the whole gas affair, Mukesh Ambani is using his tried and tested acolytes. It remains to be seen whether these cartridges are spent or loaded.

ntpc finally in the SC mix

After making all the right noises in the recent past, NTPC has stuck to its stand and is ready to challenge Reliance Industries in the Supreme Court for displaying malafide intent vis a vis its commitment to supply gas to the Kawas and Gandhar plants. By filing an appeal on Saturday, it questioned RIL's attempts at wriggling out. Moreover, it challenged a Bombay High Court order allowing RIL to change its stand midway through the hearing on the PSU's pending specific performance suit.

The NTPC appeal assumes tremendous significance for two reasons - RIL cancelled its gas supply contract by sending a letter to NTPC on June 17, 2005 saying that it was 'unconcluded' when the Ambani family MoU was made public on the morning of June 18, 2005 and even more vitally, the terms and conditions of the RNRL-RIL contract for gas supply were based on the price and tenure of NTPC's contract with RIL signed much earlier. This clearly showed RIL's corporate misconduct because it realised that it would now have to supply gas to two entities almost simultaneously - NTPC and RNRL - at $2.34 per million unit for a period of 17 years. Gredde overcame everything else at this stage and RIL began to paper over the reality of supplying gas to two corporate entities and reneged using the oil ministry and DGH to fight its battles.

However, both RNRL and NTPC dragged RIL to the Bombay High Court resulting in the case falling in the SC's lap after much arguing. Against this background, NTPC's appeal will in the apex court will definitely have some bearing on the RNRL-RIL case as well because in many ways it is all intertwined. NTPC has faulted the July 30 HC order of the Bombay HC saying that it does not recognise the sanctity of the commitment given by RIL which won the tender through a global bidding process quoting the lowest rate - the said $2.34.

Its 76 page appeal obviously written by government law officers slammed RIL for using some pretext or the other. Both the AG and the SG were unanimous that NTPC's rights and interests needed to be protected against RIL. Their observations were hard hitting and have been taken on board the NTPC appeal.

Wednesday, September 2, 2009

oil ministry backs down on family mou

In damage limitation exercises, newly appointed RIL ED PMS Prasad may be flying journalists to the KG Basin to give them an update on the gas opera, but with the government amending its Special Leave Petition, it is now crystal clear that the case to be heard before the Supreme Court will focus on the same two issues - interpretation on the price of gas and the gas utilisation policy, as was the case before the Bombay High Court earlier. All manner of tweaking that the oil ministry tried to give the case has been summarily dropped due to the incessant media pressure from RNRL.

The Bombay High Court had asked RIL to supply 28 million units per day at $2.34 for 17 years, against which RIL appealed to the apex court. Now the key here is that the RNRL-RIL contract was signed before the gas utilisation policy which the oil ministry in its fresh appeal to the SC wants set aside. Even more categorically the decks have been cleared for the protection of NTPC's interests, something that RNRL and other group shareholders were asking for through a media blitz which culminated in a a series of adevrtisements in all small and big newspapers. The EGoM of September 12, 2007 had approved the gas price of $4.2 per million unit at a crude price greater or equal to $60 per barrel.

The entire handling of this gas row by the oil ministry has deeply embarrassed the government. Now that a new EGoM is being constituted, it would be right for Murli Deora to distance himself from this unseemly row and allow the government to direct the oil ministry to simply allocate the requisite amount of gas to NTPC on a nomination basis so that Kawas and Gandhar can be kick started. This will render the NTPC-RIL case infructuous and resolve one part of this quadrangular fight.

Tuesday, September 1, 2009

deora dares, plan panel strikes down

With Murli Deora asking for a reconstitution of the EGoM to allocate gas from the KG Basin fields beyond 40 million units, the Planning Commission instead wants the oil ministry to adopt the recommedndations laid out in the Integrated Energy Policy on the pricing of gas. Deora believes that there is a need to revive the mechanism so that gas can be allocated beyond the 40 million levels to new customers, but Montek Singh headed Plan Panel wants its recommendations to be reflected in the note that the oil ministry is preparing for the Cabinet on the contentious issue of gas pricing.

The Integrated Energy Policy contends that as the shortage of natural gas was likely to continue, its price, allocation should be independently regulated on a cost plus basis including reasonable returns. Deora who is known to do abrupt about turns on policy is now wondering what to do next. Though he met principal secretary to PM T K A Nair over the weekend to present his case for a new EGoM on the lines of the previous one headed by Pranab Mukherjee, it remains to be seen which path he will follow now.

Will his Cabinet note mirror realities or will they be full of flights of fancy in order to show his unstinted support to RIL chairman Mukesh Ambani? Or will he listen to the Plan Panel and take their recommendations on board. All this needs to be done quickly because with the Supreme Court deciding to hear the Ambani gas opera from October 20, Deora will find that time is not on his side. After all he will also have a role to play in the forthcoming Maharashtra elections. In what capacity, no one knows for sure?