KG Basin :A Story of Loot Of Natural Resources

No country in the world will allow private sector to flourish at the cost of exploitation of its natural resources. KG Basin story is full of drama in which a government allows a private firm to play with rules and regulations of the nation and what is more surprising that the government even acted as if gains from the whole exercise are going in its own pocket. Before going back to a major policy changes that led to participation of private players to operate in oil and natural gas exploration in 1999, it is imperative to quote CAG report "PRODUCTION SHARING CONTRACTS BETWEEN THE GOVT. AND PRIVATE OPERATORS WERE DESIGNED TO ENCOURAGE INCREASING CAPITAL EXPENDITURE BY PRIVATE CONTRACTORS, WHICH REDUCES GOVERNMENT'S SHARE OF OIL AND GAS REVENUE."

Under New Exploration Licensing Policy of 1999; the government allowed Reliance Industry to explore natural gas in KG Basin the largest gas basin in Asia, under Production Sharing Contract (PSC). The main objective was to  prevent hoarding of natural resources and to get a better price for them.  Further the government will gain progressive control over the gas sources. However when phase I and Phase II  were complted the original arearemained with the Reliance Industry  which began exploration of Phase III as a result it continues to hold ownership over entire 7600 sq.km.and what is more unique that the government has taken a volt face by declaring the whole area as discovery area. CAG comments" the contractor's opinion that petroleum was likely to exist in the entire contract area and could be produced after an exhaustive exploratory program is not in consonance with the PSC definition of Discovery Area which is centered on existence of petroleum based on wells drilled in that part. "
The contract given to the Reliance Industry has the concept of INVESTMENT MULTIPLIER which is a ratio between commutative net income and commutative capital investment.  As IM goes on increasing therefore in the long run profit of government will go on increasing, however it is also possible that private party will do everything to keep IM  stagnant. It is here  the whole contract turned to be unique--"if Investment Multiplier (IM) is less than 1.5 then profit is 10%; if IM is between 1.5- 2 then it's 16% and if IM goes above 2.5 then the government share of profit goes  to 85%." Do we have right to know HOW HAS THE PERSONAL GROWTH OF MUKESH AMBANI ASSESTS IS 341% MORE THAN ANY INDUDTRIALIST IN THE WORLD IN LAST 9YEARS.

Now Reliance Industry estimated initial cost to be 2.4 billion dollar in 2004, but it was revised to 5.2 billion dollars in 2006 so that IM remains below 2.5 and government gains are limited. Thus  as per the CAG report there is even reasons to believe that investment costs of Reliance Industry have been manipulated 

As regards to pricing policy the gains of the Reliance Industry are more intriguing. When ONGC was selling the gas at the rate of  1.83 dollar per unit the government allowed Reliance Industry to sell gas at the rate of 2.34 dollar per unit in 2094. In 2007 the government further increased  the price to 4.2 dollar per unit. Noting this the CAG submitted that "it was the highest price received by anyone for natural gas anywhere. Whereas the cost was about 1.43 dollar per unit. "Common man's calculations state that gains are 4.2-1.83=2.37 dollar per unit multipled by quantity produced amounts to huge amount  at the cost of exploitation of people and country's natural resources. In the meantime the Reliance Industry has managed to sell its 30% share to British Petroleum for7.2  billion dollars in 2011 abd its approval was given by none other than the committee headed by PM. And now the Reliance Industry has approached the government to increase the price to 14.2 dollar per unit because the production has declined to 31mmscmd from 61 mmscmd, when it was supposed to go up to 80mmscmd and eevery time the company has given excuse that due to the lower output it is incurring loss .However according to Morgan Stanley Reliance Industry IRR is 33% in KG Basin operation which is the highest in the world for any company and it also constitutes one third of its total profit.
Now the nation has lost Rs.125000 crore revenue. And in whole story of manipulation the government was supporting the the Reliance Industry step by step as if it has become shameless and so arrogant that it is ready to go to any extent to help a private firm. Nothing in this world is free of cost and nothing the politicians do without any hidden motive of personal gain . Therefore some people likeCPM MP Gurudas Gupta and former Power Secrectary Mr.E.A.S.Sharma have moved to Supreme Court against Reliance Industry and Veerappa Moily accusing them of manipulating gas price hike to increase profit .Finding that even there is delay in getting judgment early , Mr.T.S.R.Subramaniam, Former navy chief R.H.Tahiliai and lawyer Kamini Jaiswal went to Delhi CM ,who promptly asked Anti Corruption Bureau to file an FIR against Chairman of the Reliance Industry , Petroleum Minister and others. The first reaction of the Reliance Industry was very reserved but Mukesh Ambani knows that he is heading towards bad ground where there is no Manmohan Singh and his Government to save him and if Kejriwal remains commited to the basic principle of gaining popularity and supprt of people in the election then it may prove to be very costly affair for Ambani.  The statement of Virappa Moily that gas prices are going to increase from April 2014 is again an indication of how much pressure Ambani can excert  on the government.  Here it is interesting to see that both BJP and Congress  have united voice on this issue and supporting directly and discretly to Ambani who happens to be the largest financer for election.Now the common man waits for Supreme Court judgmentand outcome of FIR lodged by Kejriwal government.