Ambani feud reveals ‘policy vacuum’ on natural resources

Over the past three months, hardly a day has gone by without the sibling rivalry between the Ambani brothers hogging the headlines. But in the brouhaha over the allocation and pricing of natural gas from the Krishna-Godavari (KG) basin, one aspect has often been ignored: that at the root of the controversy is the Union government’s inability to formulate a coherent, rational, fair and transparent gas utilisation policy.

On October 6, V K Sibal, director general of hydrocarbons (DGH), under attack for allegedly favouring the Mukesh Ambani-led Reliance Industries (RIL), sought government protection saying he saw a threat to his life from those associated with the corporate group controlled by Anil Ambani, Mukesh’s estranged younger brother.

The allegation was promptly denied by a spokesperson of the Anil Dhirubhai Ambani Group (ADAG) on a day the group filed an application in the Supreme Court claiming a nexus between RIL and the DGH to approve a more than threefold increase in the capital expenditure (capex) incurred by RIL to exploit KG gas.

The following day (October 7), the DGH put out full-page advertisements in newspapers justifying the hike in capex. And the media reported on how the Central Vigilance Commission had asked the country’s premier police investigating agency, the Central Bureau of Investigation (CBI) to “discreetly” probe allegations of whether Sibal and his family actually received personal favours from RIL and others.

A senior executive who works for one of the squabbling Ambani siblings, two of India’s richest men and among the ten wealthiest individuals on this planet by a Forbes count, once told me off the record, “Women have mud plastered over their faces because their skins glow thereafter and they appear prettier. In India’s corporate sector, when muck is flung by business tycoons at each other and against their political mentors, one only hopes the mud-slinging will bring about some good, some cleansing of the country’s crony capitalist system and some transparency in the working of the murky nexus between big business and politics.”

We were sitting in his office and discussing what prompted the younger Ambani sibling to publicly lash out against not only Mukesh but also against the ministry of petroleum & natural gas and, by default, its most important functionary cabinet minister Murli Deora.
I recalled how Anil’s father, the late Dhirubhai Ambani, founder of the Reliance industrial empire, had openly flaunted his proximity to former prime minister Indira Gandhi. After she returned to power in the 1980 general elections, Dhirubhai in fact shared a platform with her at a victory rally. Those were days when few businessmen in India were so public about their political predilections.

More recently, I interviewed one of the country’s foremost experts on energy and power,
Surya P Sethi, who has just retired from the government after serving as principal adviser to the Planning Commission for nearly eight years and having worked outside India for nearly two decades on various infrastructure and energy projects in at least 30 countries.
Sethi told me that even if the Ambani siblings “settled” their dispute, the crucial issue that would remain unresolved would be the need to fill up the “policy vacuum” with a set of norms for allocation of natural gas that are “credible and defensible.”

He said he unsuccessfully opposed a formula-driven methodology for pricing natural gas that is used to price liquefied natural gas (LNG), which is a separate product. He added that a study conducted by the public sector GAIL (formerly Gas Authority of India Ltd) on policies pursued in as many as 39 countries had indicated that there was no precedent for formula-based pricing of natural gas.

Thus, in the opinion of this expert and others, the natural gas sector in India is structured in a flawed manner so that the control of production, transportation and distribution of gas is so monopolistic that it results in “non-competitive” behaviour, which includes cornering of concessions and “predatory pricing” by private contractors.

I, for one, am fully convinced by this logic and intend co-authoring a book on the wider dimensions of the dispute —- such as the manner in which the country’s resources are utilised and priced and the infamous nexus between private capital, government bureaucracy and political leaders.

It is easy for Deora and his friends to claim that the natural gas that lies beneath the bed of the Bay of Bengal does not belong to either of the Ambani brothers, but to the government. However, the crucial question that arises is whether the government is indeed acting on behalf of the people of the country as a custodian of its national resources or as a partisan player.

The Supreme Court starts hearing the legal dispute from October 20. The apex court’s decision could set an important precedent on the role of the government and private corporate entities in controlling the country’s natural resources and the future of crony capitalism in India.

The writer is a journalist, and an analyst of India’s political economy. Views expressed are personal.