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  Reliance KG Gas Scam  
 

 

 Not much edited after 2013: There may be minor additions once a while

July 2017: I have a suspicion that Reliance will get Deep water Gas price of about 5.5 Dollars per mbtu instead of / from the present price of 2.5 Dollars per mbtu. Efforts must be getting some positive feedback. The share price has gone up by about 30% in the last one month

 

Spicy Shots section:

 

We are a Nation of Mute Millions. The Media, the so called Intellectuals and the Bureaucracy, besides others, continue to keep mum as a better part of valour. Many do not express their true views in public. I felt that in 1960. 'After Nehru, what?' was a over blared, disgusting exhibition of sycophancy by the spineless then. The pseudo intellectuals and over smart TV anchors are additional nuisance factors today. 'Sub Kuch chalta hai' is the operative reality. The Tragedy continues. 

Now in 2017, Modi has overtaken Nehru in the number of sycophants behind him. He is now an egomaniacal autocrat

This section has nothing to do with the main Swapna section.. I do have critical views on some socially relevant issues. As this is my personal website, I have some pages to express my views.

 

The Documented proof for the Scam Value

 

 Non erasable, admitted record in the Supreme Court by Reliance Industries

Reliance said in reply to RNRL petition in the Supreme Court [Business Standard, 8th October, 2009] that RNRL would make 21000 Crores Profit per year for 17 years, if it gets gas at 2.34 Dollars per mbtu and resells the Gas at market price of 4.2 Dollars per mbtu.

 

This amounts to 3570000 / 3 lakhs Fifty Thousand Crores.

 

Reliance Industries, RNRL and Government of India are the parties involved. Government of India did not ask for anything. They kept away from the Supreme Court fight - and even after this admission by Reliance. 

The supreme Court ruled in favour of Reliance Industries in the fight between Reliance Industries and RNRL.

So the above amount, that would have become a wind fall profit for RNRL as admitted by Reliance, did not go out of Reliance.

Naturally it is an unexpected windfall profit for Reliance.

 

Supreme Court knew about this 'windfall profit' since Reliance made the submission there. Yet they did not make any provision for this 'windfall profit' confession  I am not impressed

[Reliance Industries controlled by Mukesh Ambani signed a gas supply agreement with RNRL, a unit of Anil Ambani, younger brother of Mukesh Ambani. Anil Ambani was a Managing Director of Reliance when the contract for gas exploration in KG basin was awarded to Reliance is a very relevant point]

[ Wind fall profit:  The estimated cost of production was 1.23 Dollars per mbtu. The actual cost of production was less than 1.23,

ONGC was selling gas at 1.45 Dollars per mbtu. It gradually raised it in stages, and nearly matched it to RIL. I think it is a devious and calibrated cover up by the then Government. Both ONGC and Reliance had near about equal / 50% market share of Gas]

 

The family agreement was for 70% of the produce. Had it been 100%, the above profit figure would have been 5 lakh Crores.

3.57 x  100 divided by 70 nearly amounts to over 5 lakhs Crores

[Reliance could charge 4.2 Dollars per mbtu to RNRL plus transportation charge of One Dollar per mbtu plus Marketing margin - about 5.4 Dollars per mbtu. ]

[ When cornered, Government claims belatedly in a low voice that it is the owner and Reliance Industries is only a Contractor. Have some pity for the owner. The contractor quotes for the Gas to NTPC. He goes back on the contracted price is a different matter and cannot be questioned. The Contractor / Mr. Mukesh Ambani  takes that quoted price to NTPC as sacrosanct and valid for signing up a family agreement with his younger brother]

 

This 5 lakhs Crores wind fall profit amount seems right in my opinion. And in reality, the loot can be in excess of I0 lakhs / million Crores.  The basis is provided by the details below.

1. The gas price was inflated. Reliance offered the price of 2.34 Dollars per mbtu to NTPC. The price difference between 2.34 and 4.2 Dollars per mbtu was 'manipulated income' in my view

One has to know the gas quantity sold so far, to reach a meaningful figure of the extra income

2. The earlier planned capital expenditure was, say around 2 Billion Dollars. Subsequently, the plan was submitted to double the production and the capital expenses was to go up 4 times. A 3rd standard student who does such mathematical sums will be rated 'dull / poor in mathematics'

Reliance does that. IAS passed personnel man the administration. So called renowned Economists and Experts are in decision making. This ridiculous proposal of Reliance gets the sanction. 4 Billions / 20000 Crores is sanctioned. Gold Plating is commented by the Auditors.

Reliance has the right to recover the cost - the fictional cost?

3. ONGC claims to have lost 11000/ worth Gas. Reliance is the offender

4. Over priced Gas, Inflated Capital Expenditure, convenient leakage of ONGC gas to Reliance -  it is all stupefying

Reliance sells 25% stake in Reliance Petroleum to BP for over 20000 Crores - I do not recollect the exact figure. Reliance also off loads shares at about 225 per share - the share crashed to Rs 80 gradually. SEBI's penalty was over  2000 Crores

So, if one tries to account everything, 5 Lakhs Crores may turn out to be very conservative. The tragedy is no one has bothered much.

 

Joke of the Year

1st September 2016

Mr. Mukesh Ambani, in the launch speech for Reliance Jio talked about Ethics and Business Codes / advised the competitors to be fair and not misuse their power to disturb the calls on Jio.

July 20, 2017

The Tainted gives a lecture on Moral Science

Reliance wants the inter connect charges to be reduced by the existing Telecom Operators. It reasons that the Telecom Operators have already recovered their investment and reasonable return already and so can afford to lower the charges.

Reliance and its supporters mean Bharti, Idea and Vodafone. There is also another player called BSNL. That is, BSNL has also charged in excess / over charged / looted.

As BSNL is a Government concern, Reliance's accusation means that BSNL also looted. Government should come out with a meaningful explanation.

Should not Reliance, as per its reasoning,  return 'the wind fall profit' mentioned above

It is lobbying, seemingly with effect, for a price of over 5 Dollars per mbtu against the present price of 2.5 Dollars, which has been market driven

Governments do not loot. They pinch every now and then with taxes and other regulations. As regards payments of amounts due to others, it always prints more notes and circulates the currency notes. After demonetisation, did they not print over 12 lakhs Crores notes in 6 months ?

 

Corporate Ethics

25th March 2017, Business Standard

Reliance Industries have to shell out nearly 1000 Crores for its  2007 Fraudulent Insider Trading activity. It is perhaps also debarred from Forward Trading activity for a year. That says something about the Company. Many would shout in chorus that it does not reflect upon Mr. Mukesh Ambani, the top man in Reliance.

[Business Ethics is spoken from the Podium on Ceremonious occasions. Otherwise, it is currency in all colours]

 

Business Standard' e expose

 

Business Standard has written an article in May 2014 about this swindle. I chanced to note it on 10th May in Google results. Readers may find that piece very interesting.

An interesting line in that article gives the core point of the whole scam

THE VERY FIRST LINE OF A PRODUCTION SHARING CONTRACT CLEARLY SAYS THAT BY VIRTUE OF ARTICLE 297 OF THE CONSTITUTION OF INDIA, PETROLEUM IS A NATURAL STATE IN THE TERRITORIAL WATERS AND THE CONTINENTAL SHELF OF INDIA IS VESTED WITH THE UNION OF INDIA?.

That is, the Government is the owner. The tragedy is that Contractor dictates the Price
 

If the Constitutional position is violated, vitiated, diluted, undermined or overlooked for pecuniary causes or any other reason, the Contract becomes questionable and invalid

 

The loot needs to be checked and stopped. 

 

[Interim Budget:  17th Feb 2014: Fuel Subsidy for 2015 - 65000 Crores - Rs 550 per person. I hate the loose usage of the word 'subsidy'.   And the Corporate Industry is a perpetual, vociferous and rich cry babies. For them, it is always incentive!

It is the 120 Crores Indians who are the owners of this KG Gas. In my view, they will be robbed of nearly 12500 over the years and remain satisfied with a 'subsidy of Rs 550'].

After the introductory background details, the explanations / calculations are given.

 

 

Swapna in  Web Search

On 27th June, 2017
   

Query: Hairloss control and Hair Growth with supportive proofs:

Top Ten position for this site - about 3.7Million results:

 

Background particulars

 

1. The Natural Gas in Krishna - Godavari / KG Basin is a national property belonging to the Public. The reported reserve is about 10 Trillion Cubic Feet /TCF. The investment planned was 1 Billion Dollars for 1 TCF of Gas. That is, 10 Billion US Dollars was the planned investment, to be incurred in stages. Reliance had no experience in Oil excavation. [Prior experience is needed only for peon, junior clerk's appointments?]

2. The Government has colluded with Reliance to cheat the Indian Public - in 2 ways. Is it a reliable custodian as we assume ? No

Reliance Industries will get 8.4 Dollars per mbtu from April 2014. The cost of production is less than 1.3 Dollars per mbtu. The windfall profit to Reliance is unexplained till date. Favoured Looter ?

ONGC will also sell Gas at this price. It was selling at 1.45 Dollars per mbtu till 2008. The price was quietly raised to 4.2 after Reliance price was approved by EGoM. Now, like Reliance, it will also charge 8.4 Dollars per mbtu  authorized looter

3.  Several projects, with investment over 40000 Crores, mainly power and fertiliser,  are operating at less than 30% Capacity for lack of supply of Gas.

India is a power deficient country. The Government went for costly 'nuclear power plants'.

One Dollar rise in Gas price means 50 paise raise for one unit of power. [Does the Government want the power prices to rise so that 'Nuclear Power prices' do not appear high. And Americans are lobbying hard for power plants. ]

If the Public does not like this, they can always settle down in Greenland, one sixth of which belongs to India.

 

The Wind fall profit to Reliance is more

 

The above 5 lakhs Crores figure is conservative. If RNRL could make 357000 Crores with the gas purchase price of 2.34 Dollars per mbtu, will not Reliance Industries with its gas production cost of 1.30 Dollars or less per mbtu will make more money. It will. 

Reliance wind fall profit is comfortably over 5 lakhs Crores.  The exchange rate was less than  Rs 53 to a Dollar in 2009. As of 2014, it is Rs 62 to a Dollar. So, if we allow for the rupee depreciation, the undeserved / manipulated wind fall profit is over 6 Lakhs Crores, at the old price of Gas

 

Gas Reserve - Colossal Scam

 

There is one more hidden story in this figure. Let us assume that RNRL would have had profit of 1.86 Dollars per mbtu [ 4.2 minus 2.34 = 1.86] And the profit value of 21000 is admitted by Reliance. If you divide the profit value by the profit margin per mbtu, we get the Quantity.

21000 divided by 1.86 is equal to 1129032000000 mbtu = 11.2 TCF

[Please do no assume that RNRL will spend anything for Sales. Otherwise you will get splitting headache]

Reliance had informal agreement for 70% of Gas production and not the entire quantity.  So to get the total Gas quantity / reserve, we have to  multiply the above figure by 10/7

11.2 x 10 divided by 7 = 17 TCF

The Government did not assess or verify the Gas Reserve.  My figure above is no less or no more reliable than what is put out by the Government so far. Is it stupidity or dictated  by stooges?

 

As BP bought 25% stake in KG Basin after 2011, at price close to Reliance's purported total investment, all the above unpleasant figures put out by me, have logical support

 

Points so far

 

Reliance -'RNRL will loot 357000 Crores. Prevent that. Let me loot. I have the first right. Government agrees'.

This admission questions the profiteering and

granting license in 2003 with terms like Price to be inserted in 2007,

making orphan of NTPC and 'Reliance', an undependable major supplier of Gas / risking India's 'power security'

who all Got what and how is a matter for thorough investigation. Till then, speculations have to exist

[Name changers: Many with one or two 'i' in their names have become powerful in the last decade. Experts in name changing trade should check up this factor relevant to India and think up new names]

 

Other Disturbing Calculations / Additional Profiteering

 

[I have a bit of eye strain. There can be minor oversights in the calculations below. Please cross check]

 

1] Zoomed up Sales / Profit and Asset value:

Trillion means 1 followed by 12 Zeros. Stated reserve of KG basin is 10 Trillion Cubic Feet. This was never checked and verified by the Government. Mukesh Ambani / Reliance is a Honest entity / Harish Chandra

TCF means Trillion Cubic Feet. One Cubic Feet of Natural Gas will provide about 1.027 British Thermal Unit. M in MBTU means Metric. MBTU is 1000 British Thermal Unit. For ease of calculation, let us take 1 cubic feet is equal to One BTU.

Let us value the asset. Metric BTU / MBTU is 1000 BTU / 3 zeros. Million is 1 followed by 6 Zeros. Billion is 3 more Zeros. That is, totally 12 Zeros. 10 TCf means 10 followed by 12 zeros in BTUs. Simple conversion, leaves 10 Billion MBTUs [1000BTU] for sales. At proposed market price of 8.4, it amounts to 84 Billions Dollars.

The present asset / Gas value of KG Basin = 84 Billion Dollars: even 70% means roughly 60 Billion Dollars  Reliance Investment in the Basin  is roughly  10 Billion Dollars with 'gold plating'

 

 10 Billion appreciated to 84 Billions;  roughly 8 Times in less than 6 years

 

All capital equipments would have been written off / depreciated. Assumed as Zero Value but not really.

There is all round doubt about the declared reserve. One written evidence has been presented above. If the reserve is high, the enrichment is much more

Some financial pundits / economists say 'foreign investment is not easy to come and growth may get hurt. Publicise how the Government helps Reliance. There are persons like Mad Off. Investment will flow.

 

2. Foreign Exchange Gain - only 47%

 

When the project was awarded, the exchange rate Rs 42 to the Dollar. Now it is 62. Perhaps there is nearly 47% plus gain, due to rupee depreciation alone. Why the price was fixed in Dollars is unknown

[why not a Ranganathan committee for fixing price of Banana or the now famous Chai / Tea in Dollars ? ]

 

Money minting Gas

 

The cost of production was 1.24 Dollars perhaps 2 years back against the originally estimated 1.3 Dollars. This cost cannot shoot up as with water / raw material for hydro electric projects. At the current price of 4.2, there is enough profit

At the proposed 8.4 Dollars, the extra 4.2 is a super wind fall profit. Even if we assume that the left over reserve is only 7 TCF,

the super undeserved and questionable profit is 1.82 lakh Crores.

There can be minor differences / errors in the calculations, depending upon the assumptions or approximations with available data. Still, they say one thing clearly and categorically.

 

Government allowed Reliance to loot. Now Government also indulges in profiteering. You cannot blame them. Except RBI, others cannot print Currency notes. Because of this road block, Government perhaps opted for Gas to Reliance. What more is in the pipe line is the question

 

Additional Points if you wish to read further

 

Other Evidence for Scam

 

Shale Gas:  Reliance Industries bought Shale Gas fields in United States 2-3 years back. The price paid was below 4 Dollars per mbtu. The Government does not know this. Something fishy ?

New Bid

Reliance quoted a figure of over 10 Dollars per mbtu for one Coat Bed Methane field within India. It must have kept Essar as well as others out from bidding. It happened within the last 2 years, as per recollection

There is scam smell. [ Essar price for CBM gas is 5.25 Dollars or so - recollection - as decided by Government]

 

Both these facts, make everything appear suspect about Reliance's role in KG Gas

 

Nail Reliance / Original Price

 

SC, in its judgement in the RIL-RNRL case, stated that ?the government owns the gas till it reaches its ultimate consumer. How did Reliance quote 2.34 to NTPC without ownership of Gas or 'power of attorney for sales'

Yet, Reliance quotes the PSU agreement to say that Government cannot fix the price. "It added that under clause 21.6 of the PSC, the government is only required to approve the formula for determination of the gas price and not determine or fix the sale price.?  This clause contradicts the 'quotation drama' with NTPC.  The Government remains mute.

It sounds stupid and or brazenly arrogant insolence with bought over support, because without a price and profit,  project viability and  bank lending could not have been worked out.

 

Bank records will make 'project proposal details' clear.

Public sector banks must have also lent. The Project viability details will expose a lot more

 

An EGoM constituted on gas had fixed on 12 September 2007 the price of the fuel from RIL?s D6 block in the Krishna-Godavari basin at $4.2 per mbtu. Shri Raja Shekar Reddy, late Chief Minister of Andhra has opposed the price of 4.2 Dollars

 

Due to the Tantrums of Reliance / poor supply of Gas, I recollect having read somewhere that 2 power plants based on Gas and some fertiliser units have shut down / nearly collapsed. Rs 70,000 Crores; details at the end

 

Government Earnings  - bluffs and evasions

 

DGH: Government would get 17.8 Billion and remaining 24.2 Billion would go to Reliance. The total amount is 17.8 + 24.2 = 42.0 Billion Dollars. The Gas price is 4.2 Dollars per mbtu.

That is, Reliance share is 57.6% of the revenue. Government take is 42.4%. including Taxes. The break up is as follows. Out of this 17.8, only 9.2 is the Profit, if it is made.  6.5 Billion is by way of Taxes - Excise and Sales tax. 2.1 Billion / 5% of total revenue is the Royalty. 8.6 Billion is 'charges' and not share in profits.

Government does not spell out the break up and deliberately misrepresentsto the Public by mentioning the total figure. The ifs and buts were never mentioned by Murli Deora. . 'the government's share of the RIL gas under the PSC really becomes significant only after RIL has recovered 2.5 times its capex'

 

ONGC

 

The Government was paying about 1.80 Dollars per mbtu to ONGC, till August 2009. ONGC makes 25% profit on Sales as per 08-09 Annual Report. That is, cost plus other charges is 1.35 Dollars per mbtu and profit is 0.45 Dollar per mbtu

Now the price is 8.4. Increase in price  6.6. Roughly 3.5 time more in less than 5 years.

ONGC's gas price was raised to above 4 Dollars per mbtu in 2010. This is an open, arbitrary and suspect action to support the price granted to Reliance.

The Government, the custodian of public property, colludes with Reliance in a way

ONGC will make more profit. Gas and power cost will become costly. Next Government will face the music. Chaiwallas and Aam Admis will suffer

 

Sugar is more critical than Gas - double standards

 

The cost of production of Gas from KG basin is only 1.28 Dollars per mbtu. Approving a Sales Price of 4.2 Dollars per mbtu, at 3.28 times the cost of production, for basic bulk item like Gas was absurd, ridiculous and lacks balance. The Public have to pay for this arbitrary inflated price for 17 years and perhaps more.

In 2011, the cost of production of Sugar was about Rs 25. The sales price was around Rs 29. Sugar Companies have to give 10% of the production to Government at low rates / low margin price / levy sugar.If this practice was known and enforced for Sugar Industries by State and Central Governments, though government does not own them, why a cost unrelated Price for Gas to Reliance ? Why was not a levy gas quantity ?

 

Corporate Ethics / Integrity - Reliance Industries

 

1] Harish Salve, Counsel for Mukesh Ambani / Reliance Industries at the Supreme Court

'The MOU [family agreement] is not worth the paper it is signed upon'. Signed by Mukesh Ambani

This quote is in Supreme Court's record.

It was published by the Media. It has not been withdrawn or amended. The Media regularly reports that Mr. Mukesh Ambani is the richest person in India. How does it matter to me, to the Nation or the Public ?

I do get shocked since 1960 when the so called Pillar of Democracy, the Media, stoops to present convenient points and hide the unpleasant ones.

 

Do not the above facts also say that Mr. Ambani's words, oral or written, despite his reported wealth, cannot be relied upon ? 

He / the company wriggles out of the commitment. That is the end / present position

 

Defamation / character certificate

 

Harish Salve's comment has not been amended, altered, withdrawn or appealed for deletion. It stands.

To a cynic like me, it means that Ambani's words plus signatures is worth less than 40 paise - simple A 4 size paper. 

Can a common man say the same thing against Mr Ambani, outside of the court ? If it angers Reliance Industries or Mr. Ambani, can he ask for more than 40 paise as 'defamation charges'? Hope some lawyer clarifies this point for the benefit of readers of this page.

 

Arvind Kejriwal and others

 

6th October 2011, Business Standard: A FIR is likely to be filed against Reliance Industries. I presume that the timing would be subject to the availability of space in Tihar Jail. For 3 years, no one acted. Now in February 2014, Mr. Arvind Kejriwal has at last got a FIR against Reliance. He deserves credit for that.

 

Some respectable Civil Servants have also voiced their opinion against this 'KG Fiasco' to Prime Minister and several other departments from time to time. None has got a suitable answer. Not many have got the attention of the media. This morning [17-2-2014] I noted in one site that the Power Secretary also voiced his protest long back. When Government ignored NTPC, nothing much can be expected.

 

Some  Scathing Comments by others in position

 

1. 'The pricing formula was irrational' - Mr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission; part of the empowered group of Ministers / EGOm  who approved the price in 2007. Business Standard, 9th Feb 2012. That is a stinging comment about EGOM and its action of fixing the Gas Price

2. 'Defaulter is getting rewarded': about the proposed 8.4 Dollars per mbtu price from April 2014: Mr. Jaipal Reddy, shunted out earlier Petroleum Minister: 21-12-2013, Times of India: -

3. Times of India, 18-12-2013: 'Reliance return on Investment on the KG Gas is roughly about 300%'. The entire cost / investment has already been recovered

Media will bark a bit as usual but go silent fast: "When asked to bend, they chose to crawl' Shri Advani after Emergency]

 

Other  pages in this site About the KG Scam

This page will confine itself to the headline above.

2 other pages about the gas scam are  Reliance Gas Loot  and its continuation reliance gas loot 2

 

This page - one additional proof

12-12-'14:  The late Rajashekara Reddy, as Chief Minister of Andhra Pradesh, has objected to the manipulated pricing cheapness, scope for Gold Plating and some other points.

Persons interested in those details can click   http://www.infraline.com

 

Some relevant news / facts

1] Business Standard, 28th March, 2015

It is likely that the Government will announce a price of about 5 Dollars per mbtu effective 1at April 2015. The earlier Government used Rangarajan Committee to manipulate a price of 8.4 Dollars per mbtu

2]  70000 Crores / Seventy Thousand Crores

Investment worth about 70000 for the generation of Power are lying idle. Gas is not available. Some centralised agency will buy the Gas. Even after that, the Plants will be operating below 50% of load. All these news items are of early March 2015

I do not basically like the 'business ethics / Corporate practices' of many Indian Companies, which shot to fame because of permit-license raj / corruption. Given that,

I suspect that Reliance could have used some means to produce less gas after 2011. British Petroleum would not have picked up 25% stake in Reliance Petroleum without verifying the reserves again and the means to recover them, at an opportune future date.

 

 
Errors and Omissions exempted.  If there be any unwanted oversights, mistake in content or suggestions for improvements,  kindly let me know
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