PaRCha - JNU - All Organisations - 2014 ID-56753
.
the regulator for the petroleum business in the country. As the neo-liberal juggernaut rolled on, the NewExploration Licensing Policy (NELP} 1999 during the NDA-Vajpayee rule threw open the country's oil and natural gas basins for private players. In ho 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 sqtare kilometres and a Production Sharing Contract (PSC) was struck in April 2000 between the government and Rll and its minor (10 percent) partner, Nl KO Resources Ltd (a Canadian corporation), for Exploration and Production of gas and oil. .
The PSC has three key features: (a) prevision of gradual surrender of exploration area back to the government as the contractor 'discovers' gas for commercial production in specific pockets while cl!rtain other areas become less promising and (b) a strange 'profit sharing formula' based 0!1 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 (t:) the Reliance was supposed to supply gas to public utility industries like National Thermal Power Corporation (NTPC) at agreed upon prices. .
The 2011 Comptro!ler and Auditor General (CAG) report on PerformarJce Audit of Hydrocarbon Production Sharing Contracts .
has indicated shocking aoomalies ofReliance's KG Basin operations in all the 3 aspects -explorations, profit-sharing/investments, .
as ·.vzl! ~.s pd::::!'!g !:0ntract~-with ~ct:v~ co-09'!rotion ofthe OGH and r etrol eurn Ministry! .
On the Exploration Area: of the 7645 square kilometres given to Reliance, only 5 per cent was the 'discovery area' and the rest shnuld have been surrendered back to the Government. Thumbing it:: nose at this clause of progressive return of the basin area to the govt, Rll 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 Rll 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 submitted a revised 'field development pian' claiming to produce 80 mmscmd at a capital expense of $8.84 billion. So in the name of doubling the P Jduction 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, neith~r the petroleum Ministry nor the DGH undertook any autonomous assessment to ascertain RIL's cost claim! .
On Pricing: Here too, Ril indulged in flagrant violations of its contract. In 2004, following an international competttive bidding, RIL entered into a contract with the NTPC to supply gas at a price of$2.34 per unit {mm Btu) for 17 years. But soon Rll reneged on its contract, forcing NTP(j to file a suit against RIL in Bombay High Court in Dece~ber 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 Rll'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 Rll 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 lyerwas removed for resisting Rll'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. .
And since OctobPr 2012, RIL has been pushing for a further hike to $14.2 per unit (in the name of 'import parity price'), even while systematically rer.eging on its promised quantum ofgas 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 mms£md in 2012 against Rll's promised target of 80 mmscmd by 2012-13. It is obvious, that itwas a ploy to starve the power and fertiliser producing PSUs till its demand for higher price its met bythe 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 28June, 2013, using the fig-leaf of the so called "expert" Rangarajan Committee recommendations, announced the doubling of the natural gas price from $4.2/ mmBtu to a flexible $8.4/mmBtu for five years from April 20141 And all this arbitrary pricing decisions were being taken despite Supreme CIJIJrt's c!ezr g~!de!ir.e th~t oil c:mdg;;s b~ing natardl puiJiic r~sources, itspricing should be in pubiic interest. Foliowing a range of PIL and interv~ntions, 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. Radi:3 tapes revealed how the BJP colluded with UPA in 2009 for passing the retrospective tax benefit proposals floated by Pranab ML.kherjee only to benefit the RIL. Indeed, the RIL gas story is a classic case of crony capitalism, where RIL twisted every policy to corner maximum benefit on every aspect of the deal. Surya Sethi, former Principal Adviser, Power and Energy, Government of India, in an article in The Hindu last year, aptly described our democracy as ''Of Reliance, By Reliance, For Reliance!' .
JNUSU appeals to the student community to ioin tonight's Public Meeting at Godavari Mess at 9.30pm .
Akbar Sandeep Saurav Sarfaraz, .
?resident, JNUSU Gen. Secy.l JNUSU Jt. Secy., JNUSU .
.
.
PaRCha - JNU - All Organisations - 2014 ID-56753
.
the regulator for the petroleum business in the country. As the neo-liberal juggernaut rolled on, the NewExploration Licensing Policy (NELP} 1999 during the NDA-Vajpayee rule threw open the country's oil and natural gas basins for private players. In ho 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 sqtare kilometres and a Production Sharing Contract (PSC) was struck in April 2000 between the government and Rll and its minor (10 percent) partner, Nl KO Resources Ltd (a Canadian corporation), for Exploration and Production of gas and oil. .
The PSC has three key features: (a) prevision of gradual surrender of exploration area back to the government as the contractor 'discovers' gas for commercial production in specific pockets while cl!rtain other areas become less promising and (b) a strange 'profit sharing formula' based 0!1 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 (t:) the Reliance was supposed to supply gas to public utility industries like National Thermal Power Corporation (NTPC) at agreed upon prices. .
The 2011 Comptro!ler and Auditor General (CAG) report on PerformarJce Audit of Hydrocarbon Production Sharing Contracts .
has indicated shocking aoomalies ofReliance's KG Basin operations in all the 3 aspects -explorations, profit-sharing/investments, .
as ·.vzl! ~.s pd::::!'!g !:0ntract~-with ~ct:v~ co-09'!rotion ofthe OGH and r etrol eurn Ministry! .
On the Exploration Area: of the 7645 square kilometres given to Reliance, only 5 per cent was the 'discovery area' and the rest shnuld have been surrendered back to the Government. Thumbing it:: nose at this clause of progressive return of the basin area to the govt, Rll 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 Rll 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 submitted a revised 'field development pian' claiming to produce 80 mmscmd at a capital expense of $8.84 billion. So in the name of doubling the P Jduction 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, neith~r the petroleum Ministry nor the DGH undertook any autonomous assessment to ascertain RIL's cost claim! .
On Pricing: Here too, Ril indulged in flagrant violations of its contract. In 2004, following an international competttive bidding, RIL entered into a contract with the NTPC to supply gas at a price of$2.34 per unit {mm Btu) for 17 years. But soon Rll reneged on its contract, forcing NTP(j to file a suit against RIL in Bombay High Court in Dece~ber 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 Rll'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 Rll 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 lyerwas removed for resisting Rll'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. .
And since OctobPr 2012, RIL has been pushing for a further hike to $14.2 per unit (in the name of 'import parity price'), even while systematically rer.eging on its promised quantum ofgas 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 mms£md in 2012 against Rll's promised target of 80 mmscmd by 2012-13. It is obvious, that itwas a ploy to starve the power and fertiliser producing PSUs till its demand for higher price its met bythe 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 28June, 2013, using the fig-leaf of the so called "expert" Rangarajan Committee recommendations, announced the doubling of the natural gas price from $4.2/ mmBtu to a flexible $8.4/mmBtu for five years from April 20141 And all this arbitrary pricing decisions were being taken despite Supreme CIJIJrt's c!ezr g~!de!ir.e th~t oil c:mdg;;s b~ing natardl puiJiic r~sources, itspricing should be in pubiic interest. Foliowing a range of PIL and interv~ntions, 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. Radi:3 tapes revealed how the BJP colluded with UPA in 2009 for passing the retrospective tax benefit proposals floated by Pranab ML.kherjee only to benefit the RIL. Indeed, the RIL gas story is a classic case of crony capitalism, where RIL twisted every policy to corner maximum benefit on every aspect of the deal. Surya Sethi, former Principal Adviser, Power and Energy, Government of India, in an article in The Hindu last year, aptly described our democracy as ''Of Reliance, By Reliance, For Reliance!' .
JNUSU appeals to the student community to ioin tonight's Public Meeting at Godavari Mess at 9.30pm .
Akbar Sandeep Saurav Sarfaraz, .
?resident, JNUSU Gen. Secy.l JNUSU Jt. Secy., JNUSU .
.
.