On 24 May 2013, CPI MP (Gurudas) Dasgupta convened a media conference during which he circulated excerpts from a note dated 14 May prepared for the Cabinet together with a letter he had written to the prime minister. In it he alleged that the ministries of finance, petroleum and natural gas and the Planning Commission were ‘colluding’ to push the price of natural gas from the D6 wells in the Krishna-Godavari basin (that were being operated by RIL) way above what had been recommended by the committee headed by Dr Chakravarthi Rangarajan, chairman of the Prime Minister’s Economic Advisory Council.
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The Rangarajan committee had been constituted in May 2012 when Jaipal Reddy was the petroleum minister. When the panel presented its report in December 2012, Moily (M. Veerappa Moily) had taken charge of the ministry. The committee suggested a near-doubling of gas prices to around $8 per mBtu from the then prevailing level of $4.2 per mBtu as per the terms of the PSC (production sharing contract) between RIL (Reliance Industries) and the government. According to the note for the Cabinet leaked by Dasgupta, the MoPNG (petroleum ministry) had recommended that the price of gas be increased to around $6.775 per mBtu, well short of the figure of $14 per mBtu demanded by RIL which was the landed price of imported liquefied natural gas (LNG).
Chapter: Indian Style Crony Capitalism
On 27 June 2013, the government of India decided to effectively double the administered price of domestically produced natural gas to $8.4 per million British thermal units (mBtu) with effect from 1 April 2014 by accepting a new pricing formula based on certain recommendations made by an official committee headed by Dr Chakravarthi Rangarajan, chairman of the Prime Minister’s Economic Advisory Council and a person known to be close to Dr Manmohan Singh himself. The decision itself was not entirely unexpected. The writing on the wall had become clear a few weeks earlier. But the decision was not unanimous. The Cabinet Committee on Economic Affairs (CCEA) was split right down the middle on the issue of increasing the price of gas and to what extent. It was late in the evening and hence, it was decided that a media briefing would be organised only the next day. A terse statement was all that was put out.
With this decision, the major gas producing companies in India, the private sector Reliance Industries Limited (RIL) and the public sector Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) stood to gain substantially in terms of profits earned. At the same time, gas-based electricity was expected to become more expensive. Those in charge of a number of gas-based power plants with large idle capacities were far from happy and they were not alone in feeling this way. Subsidies to manufacturers of fertilisers are also expected to rise, since natural gas is the main raw material or feedstock used for the production of urea, the most widely used fertiliser in India. The increase in the price of gas went beyond what the petroleum ministry had initially suggested, that is a price of $6.67 per mBtu, which too was opposed by the power and the fertiliser ministries. Since the price of gas had been linked with world prices, the domestic price of gas could theoretically go higher or lower than $8.4 per mBtu if international prices rise or, for that matter, come down.
Chapter: Price of gas: End-game or New Beginning?
In one of the last acts of the 49-day AAP (Aam Aadmi Party) government in Delhi, a First Information Report (FIR) dated 11 February 2014 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, hydrocarbons, 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.’
Chapter: Politics of crony capitalism
