There are two Gujaratis said to be running the country. The first is the elected prime minister of India, Narendra Modi. The second is Mukesh Ambani, chairman of Reliance Industries Limited, and the elder son of Dhirubhai Ambani, who was born in Junagadh, Gujarat, and is the founder of the empire. It has all along been presumed that Mukesh, whose company has been accused of cultivating politicians to influence policy, would have an easy ride with Modi. There was a quid pro quo between the two, it was alleged in the course of the election campaign.
A month-and-a-half down the line, the script seems to be changing. Sources say Narendra Modi has no intention of allowing such a powerful corporate entity to dictate terms to his government. The PM wants to leave his stamp on India, the source adds, and that would involve pursuing a “viable energy policy that would work in the public interest”.
This could well mean that the NDA does not see the existing policy as being in the public interest. On June 22, there was a meeting between the PM, finance minister Arun Jaitley and petroleum and natural gas MoS (independent charge) Dharmendra Pradhan. A few days later, the cabinet committee on economic affairs ratified the decision to defer the raising of gas prices by three months. An announcement was made the same day, June 25, following which Pradhan said “comprehensive discussions were necessary on the issue. It was decided that consultations would be held with all stakeholders and it was important to keep public interest in mind.”
His words may suggest that this is just a matter of delay, not denial. But sources reveal that the government is actually seeking a radical overhaul of the entire gas policy. Step one is to move towards junking the formula the UPA used for raising the prices. What therefore seems inevitable is that the Modi regime is headed for a showdown with RIL on the gas front as the company has been strongly lobbying for the implementation of the Rangarajan committee formula.
Pradhan, reveals a government source, has been assigned the job of talking to Chakravarthi Rangarajan, chairman of former PM Manmohan Singh’s economic advisory committee, who was tasked with heading another committee that made a recommendation on pricing gas at $8 per unit, almost double the prevailing price at $4.2. The election notification earlier this year had held up this UPA decision. But the new regime in Delhi now has refused to play ball.
If the government does indeed make big changes, it would take away one of the major issues the Aam Aadmi Party had raised in the past year, as it campaigned fiercely about the inflation any potential hike in gas prices would cause. Among the several questions AAP leader Arvind Kejriwal had posed to the BJP’s prime ministerial candidate were: What relations do you and your party have with Shri Mukesh Ambani? If you form the government, would you pay the rate of $4 per unit of gas or $8 per unit of gas to Shri Mukesh Ambani?
Now the answer to the last question seems to be a ‘no’. In fact, according to a source, Jaitley asked petroleum secretary Saurabh Chandra why everything related to gas had been priced in dollars, not in rupees. The view emerging is that the Rangarajan formula is “ridiculous” as it bases the gas prices on some sort of average numbers derived from three foreign gas markets. The question being asked is whether the pricing has been done on “a cost-plus basis or bearing international principles in mind”. The government is also looking into the “gold-plating” of production costs from the K-G basin. There is a view that there are flaws in the contract the UPA signed with RIL—it does not protect the rights of the people.
There is, therefore, a continuity in the BJP’s position on gas pricing. What has changed is the fact that it is they who’ll have to balance the books and also deal with the rising costs of importing natural gas. Critics and some experts in the power sector have alleged that RIL has been showing a fall in production, and possibly even hoarding gas till prices are raised. RIL, on its part, has come out with a glossy book titled India Has Never Been Here Before: Facts you did not know about K-G basin that describes this as “one of the more amusing charges”. Hoarding of gas, they say, is technically impossible.
Yet, with the Modi regime seemingly willing to take the Reliance bull by the horns, the possibility of seeking a judicial review cannot be ruled out either, say sources. Especially if RIL hits back with litigation on scrapping the Rangarajan formula. The Supreme Court had got involved in the process during the litigation between the Ambani brothers, Anil and Mukesh, over gas pricing and had on May 7, 2010, delivered a judgement clearly in favour of the elder brother. It was actually Anil’s lawyers who first used the term “goldplating” but which has now gained currency among all those who track the convoluted issue and are critical of the RIL model that is perceived as the epitome of crony capitalism.
The UPA regime is believed to have tweaked policy, changed petroleum ministers twice and set up empowered group of ministers to devise a formula that would help the Mukesh-led RIL. Both Mani Shankar Aiyar and Jaipal Reddy were allegedly divested of their petroleum portfolio at the company’s behest; the former has said so publicly. Two other petroleum ministers in the UPA—Murli Deora and Veerappa Moily—were seen to be very pro-Mukesh. Indeed, the two key advocates of the neo-liberal model, that can at its worst degenerate into blatant cronyism, were the former head of the Planning Commission, Montek Singh Ahluwalia, and former finance minister P. Chidambaram. On occasions when the Manmohan core team was divided, the duo always weighed in on the side that favoured gas pricing arguments put forward by the company.
The new prime minister is supposed to be pro-business, pro-free market and has always advocated less government intrusion in the market, so it’s not clear yet where the dismantling of the current system on gas pricing will eventually lead. What is clear is that if the decisions in the gas sector hurt RIL’s rather deep pockets, they will be strongly opposed and the company’s lobbyists would get active. With RIL’s growing clout and ownership of the media, it is almost certain that media campaigns will also be run against decisions that are not economically favourable to a company that is used to influencing public policy.
It might be relevant at this juncture to recount a little side-story in the RIL-BJP saga. During a stormy stint as disinvestment minister in the Vajpayee government, Arun Shourie had taken many controversial decisions that were opposed by other parties. Among these was the sale of IPCL to Reliance and an attempt to divide the Indian Oil corporation and sell off a chunk to the company. Although he began his innings in the Indian Express as someone who took on Dhirubhai Ambani, Shourie is said to have metamorphosed into someone quite different as disinvestment minister. In the days leading up to the swearing-in and formation of the current government, several economic papers carried stories about how Shourie was a serious contender for the finance portfolio. Shourie camped in Delhi for several days and even gave a few interviews even though he had shifted to the township of Lavasa, near Pune in Maharashtra, several years ago. He had done so after fixing up a rental lease for his home in an upmarket South Delhi colony to a Reliance-owned company. The corporation, it has been suggested, was very keen to place Shourie in some key economic portfolio. That did not happen.
Even before the raising of gas prices was delayed, that decision was seen by insiders and lobbyists as the first sign that this regime might not be as R-positive as the last one.
Corrected online. A version of this appears in print.
Apropos Not as R-Positive, a major portion of our gas and oil requirements comes from abroad and there cannot be two prices. Though it’s a sensitive issue, the hold of Reliance and the country going into the hands of oligarchs has to be resisted. Modi is completely their product, how can he stop it?
Nasar Ahmed, Karaikkudi
This Reliance business of sending 10 crore notices to detractors is interesting. Proves they have something to hide.
Sanjay Mittal, Delhi
Who knows what the Modi government is up to? Fighting Ambani to benefit Adani?
Javed Mohammed, Delhi
Finally, an unbiased report on the gas pricing story.
S.C. Shrivastava, Mumbai
The comments about Arun Shourie aren’t true. IPCL went to Reliance through open bidding. Similarly, VSNL went to Tatas because Reliance was the second highest bidder. By Saba’s logic, VSNL should have been gifted to the Ambanis.
Novonil Guha, Delhi
Why this conspiratorial tone in your Shourie comments? He has been quite open in declaring how he changed his opinion on Dhirubhai Ambani by 180 degrees. And whatever PM Modi does on the gas pricing issue, he will be damned in the end as doing the bid of Ambani.
Akash Verma, Chennai
In Saba Naqvi’s article Not as R-positive, the concluding paragraphs contained a reference to former Union disinvestment minister Arun Shourie camping himself in New Delhi for several days and giving interviews in the days leading up to the swearing-in and formation of the Narendra Modi government, although he had shifted to the township of Lavasa several years ago. We have since been suitably informed that Mr Shourie had in fact been staying in his Delhi residence since November 2013 following an emergency medical complication involving an esteemed member of his family. We regret this unfortunate inference and stand corrected.
“Shourie camped in Delhi for several days and even gave a few interviews even though he had shifted to the township of Lavasa, near Pune in Maha¬rashtra, several years ago.”
Saba is such a mean B****. Probably still smarting with the whacking she got from Shourie from the “Rational Vs. National” horseshit that she dished out years ago, not realizing that she can accuse Shourie of anything but should never question him on his integrity.
When she says he ‘parked himself in delhi’ she does not realize that Shourie’s wife is going through a serious health problem and he is in Delhi to be closer to better medical facilities. His only son is a paraplegic, who needs constant medical attention too. If Saba, the b**** couldn’t be more sensitive, at least she could be a little more honest and done a better research before casting aspersions on a man of such impeccable integrity. This is the 2nd time that because of her Outlook has to eat crow!!
She should be ashamed!!
Declaration from Outlook:
"In Saba Naqvi’s article Not as R-positive, the concluding paragraphs contai¬ned a reference to former Union disinvestment minister Arun Shourie camping himself in New Delhi for several days and giving interviews in the days leading up to the swearing-in and formation of the Narendra Modi government, although he had shif¬ted to the township of Lavasa several years ago. We have since been suitably informed that Mr Shourie had in fact been staying in his Delhi residence since Nov¬ember 2013 following an emergency medical complication inv¬olving an esteemed member of his family. We regret this unfortunate inference and stand corrected."
The part about Shourie is just a load of horseshit! IPCL went to Reliance through open bidding. Similarly, VSNL went to the Tatas because Reliance was the second highest bidder. By Saba's logic, VSNL should have been gifted to the Ambanis.
I wonder this Modi government is really that brave and pro-people. It may be fighting againt Ambani to benefit Adani. But, yes, if its intentions are really good, it must be applauded.
I am beginning to suspect Saba's independence. Does she really beleive Modi would reward Ambani within a month of coming to power? Does she not remember the mock fights the former DG of hydrocarbons put up with Reliance? Expect more of the same .
Wait. And watch. Too early to comment, except that this article favours the BJP government in absence of any concrete actions. That is how the media treated the economist PM, and see what he did (or not do).
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