Millennium Post

‘Jaipal shunted for not oiling Reliance’

Prime Minister Manmohan Singh’s decision to shift S Jaipal Reddys from the petroleum and natural gas ministry to science and technology has raised many eyebrows, with several observers saying that the veteran Andhra Pradesh Congressman has been made to pay for ‘taking on’ the Mukesh Ambani-led Reliance Industries Ltd (RIL).

Reddy has been in the news for opposing RIL in a regulatory battle on gas prices that saved the exchequer thousands of crores of rupees. Ever since taking charge from Murli Deora in January 2011, Reddy has resisted the influential Reliance Industries Ltd. He also blocked the company’s efforts to get the price of natural gas revised upwards.

Besides, Reddy questioned the steep decline in gas production from RIL’s earlier high producing KG D6 gas block off the Andhra coast and brought India’s biggest private sector firm under the scrutiny of the Comptroller and Auditor-General (CAG). Arguing that global gas prices have been rising, Reliance Industries has been insisting that it should be paid more for the natural gas it produces from the KG basin. However, the domestic gas price, which was fixed by the Empowered Group of Ministers (EGoM) in 2010, is not scheduled to be revised till April 2014 — a fact that Reddy has strictly adhered to.

He also ordered that Reliance Industries’ claimed spending on bringing KG D6 into production should be scrutinised.

Reddy also acted on the government’s finding and disallowed RIL a $1.46-billion expenditure for its failure to maintain output at its KG basin facility.  The company, on its part, attributed the huge drop in output from 53-54 mmscmd in March 2010 to 27.5 mmscmd to obstacles related to the structure of the gas field. But it could not get its way with the ministry under S Jaipal Reddy.

Observers say that Reliance Industries’ output should have averaged 70 mmscmd in fiscal 2011-12.

The reality was far more grim, with actual output reaching a paltry 42 mmscmd. As a result, the exchequer suffered a colossal Rs 20,000 crore loss.

In the current fiscal (2012-13), production stands at 25 mmscmd, far lower than the projected 80 mmscmd. This again has cost the exchequer a loss of around Rs 45,000 crore.
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