Even without the charges levelled by India Against Corruption (IAC) leaders Arvind Kejriwal and Prashant Bhushan of a nexus between the UPA government and the previous NDA government on the one hand and Reliance Industries on the other over the pricing of gas from the Krishna Godavari basin, it was obvious that the company had won undue favours from successive governments. The IAC leaders have alleged that the company is actually running the government. Many experts had pointed out the defects in the contract on oil extraction from the KG basin, which the company has exploited to its advantage. It is widely believed that Mani Shankar Iyer was removed from the petroleum ministry in 2006 for not accepting the company’s demands. In the latest reshuffle, Jaipal Reddy was again shifted for not toeing the Reliance line. There is no other reason for shifting a minister whose performance was better than that of many others.
While the initially agreed price of gas from the D6 block of the KG basin was $ 2.34 per mBtu it was raised to $ 4.2 by the government after Murli Deora replaced Mani Shankar Iyer. The capex was also increased from $ 2.39 billion to $ 8.8 billion. The company has again demanded an increase in price to $ 14.2 per mBtu and there is reason to believe that Reddy paid the price for not agreeing to the demand. As a blackmailing tactic the company has reduced its output from the D6 field. This has affected production of power and fertilisers in the country and led to higher import of costly gas from the international market. The company is also known to have goldplated its expenditure and refused to submit its accounts for public scrutiny. The CAG has also found fault with the way the Reliance contract has worked.
If the gas price is increased to the level Reliance has demanded many gas and fertiliser plants may have to shut down as prices will become uncompetitive. The company will also reap windfall profits to the tune of several thousand crores of rupees. This will be at the expense of a natural resource which is national property. It will be a sign of crony capitalism entrenching itself as a feature of the working of successive governments. There is need for an investigation into the working of the Reliance contract, and it must be ensured that no more undue favours are bestowed on the company.
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