Activist-turned-politician Arvind Kejriwal today accused the Prime Minister of selling out the country to allow windfall profits to Mukesh Ambani's Reliance over its contract to develop the country's key natural gas field in the Krishna Godavari (KG) basin. He said the government appears to be leaning towards allowing Reliance to charge more for the gas it supplies, a sanction which violates the contract and would allow the company to benefit by 43,000 crores.
"It appears that Mukesh Ambani and not the PM runs the country," Mr Kejriwal said, wearing his trademark cap inscribed with main aam admi hoon
(I am the common man). "The PM's heart beats for Reliance and not the people of India," he declared. (Read: Full list of Kejriwal's charges against Reliance Industries)
Reliance has refuted the charges affirmed by Mr Kejriwal and other members of India Against Corruption. "Irresponsible allegations made by IAC at the behest of vested interests without basic understanding of the complexities of a project of this nature do not merit a response." (Full statement of Reliance)
The press conference today had been teased by Mr Kejriwal on twitter this morning as "a big expose." It's his third installment in a campaign to "out" politicians allegedly guilty of graft.
Mr Kejriwal said the transfer of Jaipal Reddy out of the Oil Ministry in Sunday's cabinet reshuffle was a direct consequence of trying to keep Reliance in check, which isolated him within the government.
No matter which party is in power, Mr Ambani calls the shots, "both the Congress and the BJP are in his pocket," Mr Kejriwal alleged. He said in 2000, the BJP-led NDA coalition gave Reliance a sweetheart deal to produce gas from the D6 fields in the Krishna Godavari basin off the Andhra Pradesh coast. The Congress, he said, "faithfully implemented" the same deal when it came to power in 2004.
Between the two regimes, Mr Kejriwal believes, Reliance has been allowed to violate fundamentals of the deal, including the price at which it would sell gas to the government. He said that Reliance has over-charged the government for gas and failed to deliver the required output.
Originally, Reliance was to supply gas to the state-run National Thermal Power Corporation or NTPC for the next 17 years at $2.3 per unit. But the company revised the rate to $4.2 per unit in 2007. Now, it wants to raise the prices of gas again to 14 dollars per unit (from about 4$ per unit), though contractually, a revision is not allowed till 2014. If a price hike is allowed now , Mr Kejriwal said, Reliance will benefit by 43,000 crores.
"Was (new oil minister) Veerappa Moily brought in to allow this? In exchange for this sanction, will Reliance fund the Congress' election campaign- is this the arrangement?" Mr Kejriwal queried. (Highlights: Kejriwal's charges)
Mr Reddy refused to allow this higher price, but the Prime Minister has sought the Attorney General's opinion, Mr Kejriwal said. "The PM has a great deal of empathy for Reliance," he acerbically suggested. Sources say that GE Vahanvati, the Attorney General, has reportedly opined that a revision of prices now violates the terms of the contract.
Last week, Reliance won a major battle against then Oil Minister Mr Reddy with the government agreeing that its auditor, CAG, would limit its review of the KG basin operation to a financial assessment. Reliance had contested a performance audit by the CAG, which would have studied the efficacies of its technology and processes. Mr Kejriwal said this was yet another concession made by the government that sacrificed public interest for crony capitalism.
Mr Kejriwal said that as a pressure tactic, Mr Ambani's company "hoarded" gas, deliberately failing to deliver the required output. He also said the government allowed Reliance to substantially increase its capital expenditure on producing the gas, which reduces the government's share of oil and gas revenue. The higher the capex cost, the longer it takes for the government to see revenue from the blocks. Though Reliance has increased its capex, the output has been falling steadily, raising doubts about the justification for the hike.