PaRCha - JNU - JNUSU - 2014 ID-64183
.
the regulator for the petroleum business in the country. As the neo-liberaljuggernaut rolled on, the New Exploration Licensing Policy (NELP) 1999 during the NDA-Vajpayee rule threw open the count ry's oil and natural gas basins for private players. In no time, the undivided RIL cornered the contract for exploring deep water 06 block of the Krishna Godavari (KG) river basin in Andhra Pradesh stretching over an area of 7645 square kilometres and a Production Sharing Contract (PSC) was struck in April 2000 between the government and Rll and its minor (10 percent) partner, NIKO Resources Ltd (a Canadian corporation), for .
Exploration and Production of gas and oil. .
The PSC has three key features: (a) provision of gradual surrender of exploration area back to the government as the contractor 'discovers' gas for commercial production in specific pockets while certain other areas become less promising and (b) a strange 'profit sharing formula' based on an 'investment multiplier criteria' where share of government profit varies from 85 per cent in a low investment scenario to 5 per cent in a high investment scenario (c) the Reliance was supposed to supply gas to public utility industries like National Thermal Power Corporation (NTPC} at agreed upon prices. .
The 2011 Comptroller and Auditor General {CAG} report on Performance Audit of Hydrocarbon Production Sharing Contracts has indicated shocking anomalies of Reliance's KG Basin operations in all the 3 aspects-explorations, profit-sharing/investments, as well as pricing contracts-with active co-operation of the DCH and Petroleum Ministry! .
On the Exploration Area: of the 7645 square kilometres given to Reliance, only 5 per cent was the 'discovery area' and the rest .
should have been surrendered back to the Government. Thumbing its nose at this clause of progressive return of the basin area to the govt, RIL started claiming that the whole basin is full of gas through 'continuity' of hydrocarbon bearing channels citing some dubious 'seismic evidence' and the govt ever willing to comply, gifted the entire area as 'discovery area' to RIL in 2009! .
On Profit Sharing : CAG pointed out the basic fallacy in the strange 'profit sharing criteria' itself, which gave incentive/leeway to RIL to show inflated cost/capital expenditure to deny profit share to the govt, because it is only after RIL had 'recovered' its inflated costs that the government would start getting its return! So, predictable subterfuges of 'gold-plating' investments (i.e. .
showing inflated capital costs) were used to deny and delay royalty to the public exchequer. Initially, in May 2004, Reliance had placed a 'field development plan' to produce 40 million standard cubic meters per day (mmscmd) of gas at an capital expenditure of $2.47 billion. After some time by 2006, they subm itted a revised 'field development plan' claiming to produce 80 mmscmd at a capital expense of $8.84 billion. So in the name of doubling the production capacity, they showed an capital expenditure plan which was inflated almost four fold! Such inflated cost estimate meant a huge loss to the govt exchequer. Yet, neither the petroleum Ministry nor the DGH undertook any autonomous assessment to ascertain RIL's cost claim! .
On Pricing: Here too, Rll indulged in flagrant violations of its contract. In 2004, following an international competitive bidding, RIL entered into a contract with the NTPC to supply gas at a price of $2.34 per unit (mrnBtu) for 17 years. But soon Rl L reneged on its contract, forcing NTPC to file a suit against RIL in Bombav High Court in December 2005. The case is still continuing. In the meantime, the company started lobbying to get the rate revised to $4.25 per unit. In 2007, the then Finance Minister Pranab .
Mukherjee as the head of the EGoM, fulfilled RIL's wish, ringing in a bonanza at least to the tune of Rs.10,000 crore for the .
company! Not just this, with the Union govt itself agreeing for the higher price for RIL gas, NTPC's court case against RIL for its originally contracted price too stood seriously compromised. It is now an open secret how in 2006, the then petroleum minister Mani Shankar lyer was removed for resisting RIL's wish list and Murli Deora brought in! When the public sector unit of ONGC was getting only $1.83 for per unit of gas till 2008, it is anybody's guess what could have led the EGoM to accept RIL's wish price. .
An d since October 2012, RIL has been pushing for a further hike to $14.2 per unit (in the name of 'import parity price'), even while systematically reneging on its promised quantum of gas supply to the user PSUs producing power and fertilizer. The gas production from KG 06 has been steadily reduced from 61 mmscmd in 2010 to 31 mmscmd in 2012 against RIL's promised target of 80 mmscmd by 2012-13.1t is obvious, that it was a ploy to starve the power and fertiliser producing PSUs till its demand for higher price its met by the govt! .
When Jaipal Reddy as the Petroleum Minister confronted by slapping a $1 billion fine on RIL for failing to meet its production/ supply targets and resisted its price hike agenda, in a repeat show of 2006, Reddy too was shunted from his office and Verappa Moily took over. Soon after, the Cabinet Committee on Economic Affairs (CCAE) on 28 June, 2013, using the fig-leaf ofthe so called "expert" Rangarajan Committee recommendations, announc.:d the doubling of the natural gas price from $4.2/ mmBtu to a flexible $8.4/mmBtu for five years from April 2014! And all this arbitrary pricing decisions were being taken despite Supreme Court's clear guideline that oil and gas being natural public re!.ources, its pricing should be in public interest. Following a range of PIL and interventions, the Supreme Court has recently stalled the hike in gas prices scheduled from April2014 till the next government takes over. .
There are several other shady aspects in the Reliance story. Radia tapes revealed how the BJP colluded with UPA in 2009 for passing the retrospective tax benefit proposals floated by Pranab Mukherjee only to benefit the Rl L. Indeed, the RIL gas story is a classic case of crony capitalism, where Rll twisted every policy to corner maximum benefit on every aspect of the de~l. Surya Sethi, former Principal Adviser, Power and Energy, Government of India, in an article in The Hindu last year, aptly descnbed our .
democracy as "Of Reliance, By Reliance, For Reliance." .
JNUSU appeals to the student community to join tonight's Public Meeting at Godavari Mess at 9.30pm .
Sarfaraz,.
Sandeep Saurav.
Akbar .
Jt. Secy., JNUSU.
Gen. Secy., JNUSU.
President,JNUSU .
-----------~;;;;::::::=--;:---.
.
.
PaRCha - JNU - JNUSU - 2014 ID-64183
.
the regulator for the petroleum business in the country. As the neo-liberaljuggernaut rolled on, the New Exploration Licensing Policy (NELP) 1999 during the NDA-Vajpayee rule threw open the count ry's oil and natural gas basins for private players. In no time, the undivided RIL cornered the contract for exploring deep water 06 block of the Krishna Godavari (KG) river basin in Andhra Pradesh stretching over an area of 7645 square kilometres and a Production Sharing Contract (PSC) was struck in April 2000 between the government and Rll and its minor (10 percent) partner, NIKO Resources Ltd (a Canadian corporation), for .
Exploration and Production of gas and oil. .
The PSC has three key features: (a) provision of gradual surrender of exploration area back to the government as the contractor 'discovers' gas for commercial production in specific pockets while certain other areas become less promising and (b) a strange 'profit sharing formula' based on an 'investment multiplier criteria' where share of government profit varies from 85 per cent in a low investment scenario to 5 per cent in a high investment scenario (c) the Reliance was supposed to supply gas to public utility industries like National Thermal Power Corporation (NTPC} at agreed upon prices. .
The 2011 Comptroller and Auditor General {CAG} report on Performance Audit of Hydrocarbon Production Sharing Contracts has indicated shocking anomalies of Reliance's KG Basin operations in all the 3 aspects-explorations, profit-sharing/investments, as well as pricing contracts-with active co-operation of the DCH and Petroleum Ministry! .
On the Exploration Area: of the 7645 square kilometres given to Reliance, only 5 per cent was the 'discovery area' and the rest .
should have been surrendered back to the Government. Thumbing its nose at this clause of progressive return of the basin area to the govt, RIL started claiming that the whole basin is full of gas through 'continuity' of hydrocarbon bearing channels citing some dubious 'seismic evidence' and the govt ever willing to comply, gifted the entire area as 'discovery area' to RIL in 2009! .
On Profit Sharing : CAG pointed out the basic fallacy in the strange 'profit sharing criteria' itself, which gave incentive/leeway to RIL to show inflated cost/capital expenditure to deny profit share to the govt, because it is only after RIL had 'recovered' its inflated costs that the government would start getting its return! So, predictable subterfuges of 'gold-plating' investments (i.e. .
showing inflated capital costs) were used to deny and delay royalty to the public exchequer. Initially, in May 2004, Reliance had placed a 'field development plan' to produce 40 million standard cubic meters per day (mmscmd) of gas at an capital expenditure of $2.47 billion. After some time by 2006, they subm itted a revised 'field development plan' claiming to produce 80 mmscmd at a capital expense of $8.84 billion. So in the name of doubling the production capacity, they showed an capital expenditure plan which was inflated almost four fold! Such inflated cost estimate meant a huge loss to the govt exchequer. Yet, neither the petroleum Ministry nor the DGH undertook any autonomous assessment to ascertain RIL's cost claim! .
On Pricing: Here too, Rll indulged in flagrant violations of its contract. In 2004, following an international competitive bidding, RIL entered into a contract with the NTPC to supply gas at a price of $2.34 per unit (mrnBtu) for 17 years. But soon Rl L reneged on its contract, forcing NTPC to file a suit against RIL in Bombav High Court in December 2005. The case is still continuing. In the meantime, the company started lobbying to get the rate revised to $4.25 per unit. In 2007, the then Finance Minister Pranab .
Mukherjee as the head of the EGoM, fulfilled RIL's wish, ringing in a bonanza at least to the tune of Rs.10,000 crore for the .
company! Not just this, with the Union govt itself agreeing for the higher price for RIL gas, NTPC's court case against RIL for its originally contracted price too stood seriously compromised. It is now an open secret how in 2006, the then petroleum minister Mani Shankar lyer was removed for resisting RIL's wish list and Murli Deora brought in! When the public sector unit of ONGC was getting only $1.83 for per unit of gas till 2008, it is anybody's guess what could have led the EGoM to accept RIL's wish price. .
An d since October 2012, RIL has been pushing for a further hike to $14.2 per unit (in the name of 'import parity price'), even while systematically reneging on its promised quantum of gas supply to the user PSUs producing power and fertilizer. The gas production from KG 06 has been steadily reduced from 61 mmscmd in 2010 to 31 mmscmd in 2012 against RIL's promised target of 80 mmscmd by 2012-13.1t is obvious, that it was a ploy to starve the power and fertiliser producing PSUs till its demand for higher price its met by the govt! .
When Jaipal Reddy as the Petroleum Minister confronted by slapping a $1 billion fine on RIL for failing to meet its production/ supply targets and resisted its price hike agenda, in a repeat show of 2006, Reddy too was shunted from his office and Verappa Moily took over. Soon after, the Cabinet Committee on Economic Affairs (CCAE) on 28 June, 2013, using the fig-leaf ofthe so called "expert" Rangarajan Committee recommendations, announc.:d the doubling of the natural gas price from $4.2/ mmBtu to a flexible $8.4/mmBtu for five years from April 2014! And all this arbitrary pricing decisions were being taken despite Supreme Court's clear guideline that oil and gas being natural public re!.ources, its pricing should be in public interest. Following a range of PIL and interventions, the Supreme Court has recently stalled the hike in gas prices scheduled from April2014 till the next government takes over. .
There are several other shady aspects in the Reliance story. Radia tapes revealed how the BJP colluded with UPA in 2009 for passing the retrospective tax benefit proposals floated by Pranab Mukherjee only to benefit the Rl L. Indeed, the RIL gas story is a classic case of crony capitalism, where Rll twisted every policy to corner maximum benefit on every aspect of the de~l. Surya Sethi, former Principal Adviser, Power and Energy, Government of India, in an article in The Hindu last year, aptly descnbed our .
democracy as "Of Reliance, By Reliance, For Reliance." .
JNUSU appeals to the student community to join tonight's Public Meeting at Godavari Mess at 9.30pm .
Sarfaraz,.
Sandeep Saurav.
Akbar .
Jt. Secy., JNUSU.
Gen. Secy., JNUSU.
President,JNUSU .
-----------~;;;;::::::=--;:---.
.
.