PM Jaipal

E.A.S.Sarma 14-40-4/1 Gokhale Road Maharanipeta Visakhapatnam 530002 Tel. Nos. 0891-6619858/ 9866021646 To Dr. Manmohan Singh Prime Minister Dear Dr. Manmohan Singh, Subject:- Pricing of RIL Gas- Serious Irregularities References:i. My letters dated 30-6-09, 13-7-09, 3-8-09, 12-8-09, 22-8-09, 13-6-11 and 27-7-11 addressed to you ii. My letter dated 8-8-09 addressed to C&AG iii. Times of India report dated 13-6-2011 on C&AG report indicating favours shown by government to RIL iv. Mint report dated 5-1-2012 on “Oil Ministry may deny RIL cost claim” v. Telegraph report dated 4-1-2012 “Reliance gas plan gets a boost” vi. The Hindu report dated 26-1-2012 on “In U-turn, RIL wants say in gas pricing” vii. Oil regulator to determine marketing margins of RIL, GAIL viii.

My letter dated 27-1-12 addressed to you on the subject ix. News report dated 2-6-12 in Economic Times on Delhi High Court order on Petroleum Regulator's powers x. My letter dated 2-6-2012 addressed to you on pricing of RIL gas xi. My letter dated 21-6-2012 to Chairman, SEBI xii. My letter dated 22-10-2012 addressed to you (enclosed) I write this letter in the context of the latest Union Cabinet reshuffle that has raised protests from several quarters. While it is your prerogative to reshuffle your Cabinet, if there are public policy concerns and apprehensions, we among the public have every right to express our views. In the case of the Ministry of Petroleum & Natural Gas (MP&NG), there are major public concerns, unanswered by your government, that have led credence to the protests against the latest Cabinet change.

The series of letters I have written to you, cited above, highlighted the serious improprieties committed by your government in dealing with RIL's gas project in Krishna Godavari (KG) Basin in AP. Neither your office nor MP&NG has bothered to take necessary action. An independent investigation by CBI, preferably without any control over it by the government and guided by CVC, will bring to light the magnitude of the losses to the exchequer, the culpability of the politicians and the public servants involved and the bigger picture of the nexus between RIL and your government.

In my view, the following are the areas that call for an independent investigation.

Land subsidence in KG Basin: MP&NG and Ministry of Environment & Forests (MOEF) have deliberately or otherwise ignored the possibility of land subsidence as a result of RIL's gas extraction activity. As a result, the KG delta area, a fertile region and the lifeline of AP's economy has faced a serious threat. Empirical evidence suggests that some damage has already occurred. The farmers of KG basin had to approach Hon'ble AP High Court against this and it was at the instance of the court that MOEF was compelled to reappraise the subsidence possibility. Even though the possibility of subsidence has been corroborated, your government apparently under the influence of RIL has remained non-responsive, against the public interest.

Natural gas resources in KG Basin: RIL had informed the public that the gas reserves in KG basin were assessed at 9TCF. Thousands of small investors, believing RIL, had invested their hard earned savings in the company. RIL had informed MP&NG that it had invested $8.8 billion in KG basin to claim reimbursement through cost oil. It assured the nation that it would produce 80 McuM per day of gas for the consumers who accordingly made downstream investments. Now, it transpires that the reserves may not exceed 1.93TCF. RIL has cut down production itself to less than 30 MMCum per day, causing a disruption to gas consumers in the south. I have written to SEBI to investigate how the small shareholders have been kept in the dark, the losses incurred by them and the undue gains, if any, made by RIL as a result of this. I have brought this to your notice. There seems to be an orchestrated silence on taking action against RIL. Your government has to answer the small shareholders of RIL and the gas/ electricity consumers at large.

C&AG audit: The activities of RIL in KG basin have a long-term bearing on the public exchequer. Natural gas resources are public resources. In my view, RIL's accounts should be audited by C&AG. I feel surprised that the government should deal with the company with kid gloves. Probably, Jaipal Reddy took a stand on this and he has apparently paid the price!

Gas price: Your government in the first instance should have entrusted the authority to fix the gas price to the petroleum regulator, which you deliberately failed to do. A Group of Ministers (GOM) had arrogated this authority to itself only to grant a massive windfall gain to RIL by fixing the price at $4.20 per MMBTU (indexed to crude price!), though RIL had earlier quoted a price of $2.34 per MMBTU to NTPC in an open bid. Now, after creating a deliberate gas shortage, RIL has dared to demand a hike in the gas price. As expected, PMO has intervened and seemed to have proposed that RIL should “auction� the gas, a euphemism for giving an open-ended license to RIL to make further windfall gains! My letter to you on this is yet to be answered.

It will be of public interest to determine the direct and indirect gains that your government has deliberately granted to RIL in the KG basin saga.

Though not connected to KG basin and RIL, MP&NG has dragged its feet on Vedanta-Cairn deal on which I had written to you several times without an answer. Perhaps, Jaipal Reddy tried to take a somewhat firm stand on this issue and the powers that be had no patience for such irritants!

I apprehend that your government will clear the way for RIL to get whatever it wishes. On behalf of the civil society, I would like to caution the government that every move of MP&NG in these matters will be closely watched and we will not hesitate to seek judicial intervention, if it is so required.

May I conclude by saying that Jaipal Reddy's sudden removal has left the country with a great deal of discomfort and apprehensions.

Regards, Yours sincerely, E.A.S.Sarma Former Secretary to GOI Visakhapatnam 29-10-2012