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Rigged Deals

The CBI glosses over a Rs 5,000 cr oil scandal involving the Centre and private industrial houses

Rigged Deals

THE leasing of the Oil and Natural Gas Commission’s (ONGC) Panna-Mukta oilfields in Bombay High to the Reliance-Enron consortium threatens to snowball into a major controversy, and yet the Central Bureau of Investigation (CBI) seems reluctant to investigate the scam. According to a rough estimate, the government stands to lose a whopping Rs 5,000-7,000 crore on the contract, which was finalised during former petroleum minister Satish Sharma’s tenure.

Despite indications of a quid pro quo between the private companies interested in bagging the contract and several decision-makers in the government, the federal investigating agency has not followed the leads. It has been sitting over the probe for more than one-and-a-half years. In a scathing report, the Comptroller and Auditor General of India (CAG) criticised the arbitrary manner in which the contracts were awarded. He said that the government had flouted rules at will and favoured private companies.

The CAG report notes that the cost incurred by ONGC in developing the Panna-Mukta oilfield—Rs 549.39 crore—was not recovered from the bidders. As for the Ravva oilfield, also in the Bombay offshore, ONGC could recover only Rs 173.25 crore as past costs although the company had spent Rs 351.05 crore on survey and drilling.

The CAG report also highlights the fact that the Planning Commission had cautioned the Petroleum Ministry in March 1994 itself that it should take note of the substantial cost incurred by ONGC on the fields. But the ministry sought to project Panna-Mukta as a loss-making unit, which according to the CAG report, is incorrect.

Interestingly, a preliminary inquiry was registered by the CBI in June 1996, six months after Superintendent of Police Y.P. Singh conducted probes into allegations of nepotism and sent a detailed report (file no. 1/636/95-Bom Part-II) to the agency. What is surprising is that the then CBI director, K. Vijaya Rama Rao, refused to put the file on record, and subsequently, all information pertaining to Panna-Mukta was blacked out. When contacted, the CBI spokesman expressed his inability to furnish even the date of registration of the preliminary inquiry.

The government opened its oilfields to the private sector following an assurance to the World Bank in July 1991. Tenders were invited by the Petroleum Ministry in August 1992 to develop 43 medium and small-sized oil and gas fields controlled by ONGC and Oil India Limited (OIL).

A negotiating committee comprising the secretary, Petroleum and Natural Gas, the finance secretary and other officials evaluated the tenders in April/May 1993. Further negotiations were held between June and September 1993. The CAG report says the contracts were awarded between October and December 1994 for five medium-sized fields and 13 small fields. The Panna-Mukta oilfields and Mid and South Tapti gas fields went to a consortium of Reliance Industries and Enron. The Ravva oilfields in the Krishna-Godavari basin was awarded to Videocon Petroleum and Australian Command Petroleum. The contract for Ratna and R-series oilfields, in the Bombay offshore, was awarded to Essar Oil and Premier Oil Pacific of UK, but the deal was not signed.

INTERESTINGLY, according to CBI documents, during the crucial period between April 1993 to May 1994, when the biddings were being processed, many industrial houses had approached the then petroleum minister Satish Sharma. Particularly incriminating is a statement given by Capt. Sharma’s additional private secretary Brijnath Safaya to the CBI in the infamous JMM bribery case—it alleges that several industrial groups sent cash-stuffed suitcases to the petroleum minister.

Safaya’s statement, recorded by inspector Harish Sharma of CBI’s special investigating unit (VIII), reveals that five industrial groups routed around Rs 13 crore to Capt. Sharma through Safaya from April ’93 to May ’94. Safaya claimed that among frequent visitors to the Sharma household were Prithviraj Jindal, owner of Jindal Saw Pipes; Dhoot of Videocon group of industries; Shashi Ruia Essar of the Essar group of companies; Mukesh Ambani of Reliance; and Oswal from Bindal Agro. "From time to time after (Sharma) became petroleum minister in January 1993, the above industrial houses used to send money to Capt. Satish Sharma at his official residence." What could be an important lead for the CBI in the Panna-Mukta case is that of the five industrial houses, three groups—Reliance, Videocon and Essar—bagged the contract to extract crude oil.

According to Safaya, the Aurangabad-based Videocon company sent Rs 1 crore to Capt. Sharma through one Wadhwa in July ’93 and again despatched Rs 1 crore in October the same year. The Essar group dished out Rs 3 crore in November ’93 using one Aggarwal as a conduit and then sent another Rs 2 crore in February through Sandeep Bhargava. Similarly, Dhirubhai Ambani and Mukesh Ambani of Reliance Industries gifted Rs 1 crore through one S. Raman in June ’93, then sent Rs 1 crore in October ’93 and Rs 2 crore in December ’93. "After receiving the suitcases I used to ensure that it contained currency notes only.... Some suitcases used to be carried by me in the official Ambassador car of Satish Sharma and delivered to him at his residence."

Even though Safaya later retracted his statement to Income Tax authorities, legal experts believe that it does not prevent the CBI from following up the case and dig for corroborative evidence. They cite the example of the Jain hawala case, where the the Supreme Court prevented the CBI from dropping investigations against the then prime minister P.V. Narasimha Rao who was named by the prime accused S.K. Jain in a statement given to the CBI under Section 161(3) of the CrPC.

CBI officials are desperate to project an "all is well" picture. Said a senior official: "The procedure for giving the contract was carefully followed. Even the prime minister and cabinet secretary were involved when the contracts were given. Each and every point raised in the (Y.P. Singh) report is being looked into but we can’t fix responsibility on one or two persons." The CBI is hedging the issue and with parliamentarians showing indifference even to the CAG report, the cover-up appears to be complete.

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