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Infighting Over Gas

Even if Ambani siblings settle their dispute, policy problems remain

The dispute between the Ambani brothers could have been dismissed as one more instance of sibling rivalry if only the spat had not involved the utilization of the country’s scarce resources, in this instance, natural gas. What is worse is the ugly fact that behind the fight between two of the richest men in India is the infamous nexus between big business and politics that has often sacrificed the nation’s interests for the benefit of a privileged few.

Over the past few months, hardly a day has gone by when the squabble between Mukesh Ambani and his younger brother, Anil, over the allocation and pricing of natural gas from the Krishna-Goda7vari (KG) basin, has not made news. The entire affair became especially murky when the head of an official regulatory authority, V. K. Sibal, Director General of Hydrocarbons (DGH) — after a sustained attack on him for allegedly favouring the Mukesh Ambani-led company, Reliance Industries Ltd. (RIL) —sought government protection as he feared a threat to his life from those associated with the corporate group controlled by Anil Ambani, Mukesh’s estranged younger brother.

The allegation was promptly denied by the Anil Dhirubhai Ambani Group (ADAG) on a day when the group filed an application in the Supreme Court claiming a nexus between RIL and the DGH to approve a more than threefold increase in the capital expenditure  incurred by RIL to exploit KG gas.

The DGH put out full-page advertisements in newspapers justifying the hike in capex while the media reported on how the Central Vigilance Commission had asked the country’s premier police investigating agency, the Central Bureau of Investigation (CBI) to “discreetly” probe allegations of whether Sibal and his family members actually received personal favours from RIL.

In the commotion, one crucial aspect of the controversy has been sidelined and that is the inability of the government of India to formulate a coherent, rational, fair and transparent gas utilization policy. One of the country’s foremost experts on energy and power, Dr Surya P. Sethi, who has just retired from the government after serving as Principal Adviser to the Planning Commission for nearly eight years, recently told me that even if the Ambani siblings “settled” their dispute, the crucial issue that would remain unresolved would be the need to fill up the existing “policy vacuum” with a set of norms
for allocation of natural gas that are “credible and defensible”.

He said he unsuccessfully opposed a formula-driven methodology for  pricing natural gas that is used to price liquefied natural gas (LNG) which is a separate product. He added that a study conducted by the public sector GAIL on policies pursued in as many as 39 countries had indicated that there was no precedent for formula-based pricing of natural gas.

Thus, in the opinion of this expert and others as well, the natural gas sector in India is structured in a flawed manner so that the control of production, transportation and distribution of gas is monopolistic as a result of which there is “non-competitive” behaviour that includes cornering of concessions and “predatory pricing” by private contractors.

It is easy for Petroleum & Natural Gas Minister Murli Deora to argue that the natural gas that lies beneath the bed of the Bay of Bengal does not belong to either of the Ambani brothers but to the Indian government. The key issue in this context is whether the government is indeed acting on behalf of the people of the country as a custodian of its national resources or as a partisan player to favour one particular business group.

DGH Sibal has held the spat between the brothers as being primarily responsible for the lukewarm response of foreign investors to the latest round of bidding for oil and gas exploration blocks. But the government has itself to blame for the current mess it finds itself in.

(The writer is an educator and a journalist with 30 years’ experience.)