Petroleum Minister S. Jaipal Reddy takes on RIL in post-liberalisation era

When P.M.S. Prasad enters a building, doors tend to open for him. The head of Reliance Industries Ltd's (RIL) oil and gas business certainly is not used to being kept waiting.Minister Reddy is trying to ensure that there is no repeat of past mistakes by the petroleum ministry. In September 2011, the CAG came down hard on the ministry for allowing RIL to retain the entire 7,645 sq km KG-D6 block in violation of the PSC. Under the terms of the contract, RIL should have relinquished 25 per cent, or more than 1,900 sq km, of the total area outside the discoveries in June 2004 and 2005. This would have allowed DGH to call for fresh bids for the area and potentially earn fresh revenues.But RIL claimed that the entire block was a discovery area and sought to retain it. The claim was studied by the DGH, then headed by V.K. Sibal, and subsequently by a committee headed by Sundareshan, who was then the ministry's additional secretary. Both agreed with RIL's contention and it was allowed to retain the entire area.Today, Sibal is under the lens for allegedly granting undue favours to RIL, including allowing the company to increase expenditure on the KG-D6 field from $2.4 billion to $8.8 billion. Going by precedent, says a retired senior CBI officer, if the evidence leads to RIL, its executives can be booked or, at least, questioned. The CAG report was also critical of government oversight of the project and sought an "in-depth review" of 10 contracts, eight of which were awarded by RIL to the Aker Group on a single-bid basis.The cold war between the two sides has taken a bit of a toll on RIL . Since January 20, 2011, the day Reddy became petroleum minister, shares of the company have shed 16.8 per cent in value compared to a 5.7 per cent erosion in the Bombay Stock Exchange index. (RIL shares were down 37 per cent between January and December 2011, before the current stock market rally.) "The market is observing things very minutely. The major trouble for the company is the more than 40 per cent dip in production at KGD6," says Bhavesh Chauhan, senior analyst at Mumbai brokerage, Angel Broking.RIL's Ganguly says "things are positive" with the ministry "at this point in time". He points to the recent approval of what is called the "declaration of commerciality" and "optimised field development plan" for the D-34 gas field in the KG-D6 block, which will allow the company to sell gas from the field commercially. The D-34 field is only the fourth in the KG-D6 block that has received such an approval (the others are D1, D3 and MA). "In oil and gas, the business stops when the drilling stops," says Ganguly, calling the approvals "good news for all of us".Still, no one doubts that Reddy has constructed a big hurdle before RIL's biggest project . "It has all been brought into the open. No one can reverse this or wriggle out of this," says the senior petroleum ministry official quoted earlier.Understandably, Mukesh Ambani is not a happy man. In December, he refused to accompany Prime Minister Singh on a tour of Russia, despite repeated entreaties. Ambani co-chairs the Indo-Russian CEOs' council. Judging by how a new line is being drawn for RIL, it may well be a while before he shares a plane with the prime minister.(An earlier version of this story erroneously mentioned IPCL is 46 per cent owned by Reliance and that Mukesh Ambani is IPCL's chairman. IPCL was fully taken over by the Reliance Group in April 2007. The error is regretted.)