Between A Rock And A Hard Place

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As the Ambanis fight over the price of gas, the actions of the petroleum ministry have acquired a pungent odour, says Shantanu Guha Ray

ON THE sidelines of a recent conference in New Delhi, pesky reporters cornered Petroleum and Natural Gas Minister Murli Deora and questioned him about an issue on which he has hung fire for a long time: the gas dispute between the Ambani siblings. A dapper Deora paused for a second, and then replied almost nonchalantly: “I sincerely wish the brothers resolve their crisis.”

That silenced everyone. But those closely monitoring the slugfest between the world’s richest brothers say that in Deora’s casual response to corporate India’s latest conundrum, lies the answer — or perhaps, the lack of one. Ever since he replaced Mani Shankar Aiyer in the fall of 2007, Deora should have overseen the settlement of an issue that had earlier been resolved in June 2005 by the Ambani matriarch, Kokilaben, after the de-merger of Reliance Industries and creation of two Reliances, one headed by Mukesh and another by Anil.

But Deora preferred to look the other way and allowed the case to split wide open. Today, the issue has split the cabinet and even confused judges of both the Mumbai and Delhi High Courts. The courts, in sheer exasperation, have asked the counsels of both brothers why their mother doesn’t intervene once more to end the stalemate.

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TROUBLED PROGRESS

Jan 06: RIL, the supplier, and RNRL, the buyer, sign an agreement

May-July 06: The two companies agree on $2.34/unit, but the government refuses consent

Nov 06: RNRL files against RIL in the Bombay High Court (BHC)

Sept 07: Government approves RIL’s price of $4.20/unit

Jan 09: The BHC rules in favour of RNRL but RIL appeals. Both parties are asked to file replies by July 20

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Deora is one of those with a keen understanding of the Ambani family dynamics, but — for reasons best known to him — has only given out clever one-liners, mostly to bytehungry television reporters, that have nicely camouflaged the issue of pricing the gas from Reliance Industries’ (RIL) Krishna-Godavari (KG) block.

To many, Deora appears to be genuinely between stuck between a rock and a hard place. If he appears to be fair, he would invoke the ire of the elder Ambani. In India, every petroleum minister lives with the fear that his job is contingent on the approval of India’s largest business house.

Deora first looked at the case when the ministry had to clear the price agreement between RIL and Reliance Natural Resources Ltd (RNRL), before the latter’s control shifted to Anil Ambani: the supply agreement was signed in January 2006. The brothers split shortly afterward.

INTERESTINGLY, DEORA, who began his business career selling yarn and other commodities from the same office — opposite the Bombay Stock Exchange — as the late Dhirubhai Ambani, rejected the price of $2.34 per unit between the two companies. He said it did not honour the obligation that pricing must be done at arm’s length. Ironically, when the brothers were engaged in their bitter and protracted fight after their father’s death that led to the de-merger, Deora was one of the biggest votaries of a split.

What’s more, he also said the KGbasin gas issue could not be a private agreement between two brothers. As a result, the government had set up an empowered ministerial group (eGOM) to decide on the pricing. But far from solving the issue, the eGOM has pushed the case to the courts. Worse, oil and gas PSUs are reportedly unhappy at the way the ministers settled the gas pricing issue for a private company within a month, but delayed similar demands from them for more than a year. Strangely, the gas allocation policy came in 2008, almost eight years after the blocks were awarded.

Deora is not keen on a second eGoM and has made a presentation to that effect to the PMO

Is the minister not keen to solve the crisis? There are allegations that Deora is visibly close to Mukesh and is present at almost all functions of the family. He did visit Tirupati with Mukesh and his family. Deora is not talking. The government is reconstituting another eGOM on gas allocation and there are reports that Finance Minister Pranab Mukherjee could be the head of the committee that will also have Deora, Power Minister Sushil Kumar Shinde, Chemicals & Fertilisers Minister MK Azhagiri and Law Minister Veerappa Moily as members.

But highly placed sources told TEHELKA that Deora is not keen on a second eGOM and has already made a presentation to that effect to the PMO. “He wants the petroleum ministry to handle the issue,” says a PMO source. In private, Deora has said that gas is a national resource and he — and his ministry — must have a say in its utilisation. The Bombay High Court had asked RIL to supply 28 mmscmd (million metric standard cubic metres a day) of KG gas to RNRL at $2.34 per mmBtu (million British thermal units), lower than the $4.2 per mmBtu fixed by the earlier eGOM. In its appeal, RIL has said that the MoU overlooked the fact that obligations must have approval of the government.

Important though the issue is, the PMO has distanced itself from it, even as lobbyists from both sides have charged the atmosphere with requests and counter-requests. The deflection of this contentious issue was reflected in a recent quip by Petroleum Secretary RS Pandey, who said that among the 50-60 news clippings he receives every morning, most in the last four weeks have been about the RIL-RNRL slugfest. Of course, some are not complaining. Lawyers of both sides have earned mega-bucks in the last two years, enough to acquire top-ofthe- line BMWs and Mercs. But national property is at stake in this faceoff, not just the egos and profits of the world’s richest brothers, and one question remains: to whom will the minister say yes?

shantanu@tehelka.com

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