Moily stalling action to seek billions in penalty from RIL

Gurudas Dasgupta has demanded Moily's resignation for allegedly favouring Reliance Industries Limited

Petroleum and Natural Gas Minister Veerappa Moily is stalling arbitration proceedings against the Reliance Industries Limited (RIL) seeking to recover a penalty of $1 billion from the firm for violating contractual obligations in gas extraction in the Krishna-Godavari basin, says CPI MP Gurudas Dasgupta. Moily is going against the recommendations of the Directorate General of Hydrocarbons (DGH) and the Comptroller and Auditor General (CAG) that the Mukesh Ambani-owned RIL should surrender a part of the gas block allotted to it and pay additional penalties, charged Dasgupta.

The CPI MP also informed that he had written to Prime Minister Manmohan Singh seeking immediate attention to the issue and an inquiry into the whole matter. “It was RIL which opted for arbitration after a $1 billion penalty was imposed on them on the advice of the Solicitor General. But after Jaipal Reddy’s departure from the ministry, every effort is being made to condone the criminality and no effort has been made to recover the penalty or impose new penalties for the failure of RIL to not only live up to the promised production but also for not doing enough to complete the works programme submitted by it despite reminders by the DGH,” Dasgupta alleged.

Dasgupta said that the DGH had recommended that 86% area of the KG basin block of RIL D6 should be surrendered by the contractor. The CAG had also made similar remarks. However, Moily has not only sought to defy the CAG recommendations but is also openly talking about going against the report of the DGH on the issue. “Every effort is being made to sabotage the arbitration process and officials are being pressurised to write a note on the uselessness of such proceedings. These need to be looked into thoroughly and a judicial inquiry should be instituted to bring out the truth before the people,” he added.

He said the $1 billion penalty was imposed on the principle that if capital investments have been made for a certain level of production and that level is not being met, then the cost recovery should also be proportionately reduced. “By the same principle, the Ministry should disallow expenditure [recover penalty] of $4.17 billion for shortfall of 55 mmscmd [million standard cubic feet per day] in 2012-13 against the approved production level. If the current production levels are any indication, this penalty is likely to touch $3 billion in the current year. No notice for restricting cost recovery based on the falling production of 2012-13 and the current year has been served on the RIL,” he charged.

However, since Moily took over, nothing has been done to recover the penalty. He said the RIL has already recovered the $5.5 billion investment made by it in the KG D6 block and it is the government that stands to lose $1 billion by not proceeding with the arbitration.

CPI MP makes fresh charges

Meanwhile Gurudas Dasgupta demanded Moily's resignation for allegedly favouring Reliance Industries Limited. He also demanded an impartial inquiry by an independent body against petroleum ministry’s alleged largesse to RIL.

Making fresh charges, the CPI MP said Jaipal Reddy, Moily’s predecessor, had imposed a fine of $1 billion on RIL to restrict cost recovery due to shortfall in production up to 2011-12. He said the principle behind the fine was that if capital investments were made for a certain level of production and the same was not being done, then the permitted cost recovery be reduced.

Dasgupta said Reddy had taken the decision after consulting the then solicitor general Rohinton Nariman. Giving year-wise production figures of KG-D6, he said it had fallen from an approved level. He said in terms of loss of power production, this translated into 13,600 lakh tonnes. In monetary terms —if this lost production were to be substituted by costly imported gas—it would imply a loss of `49,000 crore in the current year.

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