Good game of bridge
In bridge, a game of cards, a cardinal rule is to play your losers first before placing all your winners on the table. Petroleum Minister Murli Deora, an avid Bridge enthusiast, did just about that last week. Deora referred the controversial case of approval of Reliance Industries’ gas price for its mega find in the Krishna-Godavari basin, off the coast of Andhra Pradesh, to an empowered Group of Ministers (EGOM).
How then does it become a winning hand to ‘abdicate’ responsibility, when Deora is within his rights to take a call on the issue? After all, his ministry has already approved pricing for as much as 15 per cent of the current natural gas supply in the market.
Here’s why: The KG basin find is like none other—it is good enough to meet the entire deficit in the market, which is as high as half the supply of close to 170 million standard cubic metres per day. Hence, the issue has taken a politico-economic dimension. Bulk users such as the power and fertiliser industries are keen to have this gas at ‘reasonable’ rates.
Deora received a ‘friendly’ call from Fertiliser Minister Ram Vilas Paswan on this matter. Further, KG gas is fraught with legacy issues—younger brother Anil Ambani’s Reliance Natural Resources Ltd (RNRL) has a contract with his elder brother Mukesh for purchase of gas at a price 30 per cent cheaper than the price ‘discovered’ by RIL ($4.33 per mmbtu) for the purpose of evaluating government’s take from the field.
Hence, if RIL were to honour its commitment to RNRL, it would be burdened with a hefty additional payment to government towards profit petroleum. Not surprisingly, Anil Ambani has been offering free consultancy to the various consumer ministries as well as Murli Deora himself on the infirmities in the gas price discovery made by his elder brother—that it has not been discovered in the open market. In fact, Anil Ambani argues that the contract between RIL and the government demands open market price discovery.
Deora realised it early in the day that the production sharing contract between the government and RIL was susceptible to major interpretations. So, one fine morning, roughly a month ago, over a breakfast meeting with the principal secretary to the Prime Minister T. K. A. Nair, he sought to diffuse the issue by referring it to the Cabinet Secretary.
The head of the civil service went as far as to say that there were issues with the price discovery mechanism, pointing to the need for policy measures suggested under the contract, a gas utilisation policy. The Cabinet Secretary, however, did not comment on the price of the gas. He then sent the report to the Economic Advisory Council, which pointed to infirmities in the price discovery mechanism.
Although armed with this consultative approach, Deora was not convinced enough to take a call. Last week, when the matter was lobbed back into his court, he chose to resort to another consultative process, hence pushing for an EGOM, with user ministries on board, thereby diffusing responsibility at a political level.
The decision is not without criticism. The delay in approving the gas price is running up RIL’s bill register, which in turn will dent the government’s share of profit gas. However, with a shaky contract on hand, it is best to play all the losers first.
