Delhi chief minister takes on Indian tycoon over gas pricing

Delhi chief minister takes on Indian tycoon over gas pricing

Tue, Feb 11 2014

By Nidhi Verma

NEW DELHI (Reuters) – Delhi’s new chief minister took his anti-graft campaign to new heights on Tuesday, ordering an investigation into India’s richest man, Reliance Industries chairman Mukesh Ambani, and policymakers over gas pricing.

Arvind Kejriwal and his Aam Aadmi, or Common Man, Party (AAP) won the Delhi state election in December with promises to fight corruption and to tackle high utility prices.

The investigation being opened is the latest salvo against the tycoon over natural gas produced from the Reliance-operated D6 block on India’s east coast. Kejriwal said Ambani’s company had created an artificial shortage to “blackmail” the government to set higher prices.

“We believe that high prices are being caused by corruption,” Kejriwal told a news conference, speaking in Hindi.

A Reliance spokesman declined to comment on the allegations. Reliance has long maintained geological complexities have pulled production lower. The country’s upstream regulator believes the company failed to drill the number of wells approved in the development plan.

Reliance shares fell 2 percent in a flat Mumbai market.

Kejriwal’s attack plays into a heated political atmosphere, with a general election due by May.

Leading a party formed just a year earlier, Kejriwal’s victory in Delhi had stunned both the ruling Congress Party and opposition Bharatiya Janata Party (BJP).

The BJP is ahead in opinion polls as the public grows disillusioned with Congress, which leads the ruling coalition, over a series of corruption scandals and a slowing economy. Although it is unlikely to win, AAP could draw votes away from both parties.

“WELLS BELONG TO US”

Reliance had agreed to supply gas to utility NTPC Ltd at about $2.3 per million British thermal units (mBtu) for about 17 years. But the price of gas from D6 was fixed at $4.2 per mBtu in 2007 when Murli Deora was oil minister, in the Congress-led government.

Last year, after Veerappa Moily took over as oil minister, the federal government decided to move to market-linked pricing, which could double local gas prices from April 1 this year.

“Today we have instructed the anti-corruption branch to file a criminal case against Murli Deora, FIRs (investigations) against Veerappa Moily, V.K. Sibal, the (then) director general of hydrocarbons, Reliance Industries Ltd chairman Mukesh Ambani and others,” Kejriwal told the news conference.

An FIR, or first information report, is the first stage of an official investigation into a complaint. Kejriwal said he had acted after receiving four complaints.

He said he would ask the federal government to suspend any order to raise gas prices until the issue was resolved.

“The wells belong to us. If Reliance and Mukesh are not producing gas in order to create an artificial scarcity, then the government should look at giving these wells to the (state-run exploration company) ONGC and some other entity which can operate them and produce gas,” he said.

Ambani is the richest man amongst India’s ranks of billionaires, with an empire that ranges from energy to mobile phones and media. Last year, he was given security cover by the government following threats against his life.

WATER FROM A WELL

The D6 block was expected to contribute up to 25 percent of gas for Asia’s third-largest economy but its lower-than-expected output has left the energy-hungry nation more dependent on expensive, imported liquefied natural gas (LNG) to fuel power and fertiliser plants.

Oil Minister Moily, asked for his reaction, said he had taken a special interest to ensure that gas prices were reduced.

“It is not the question of Mukesh or Deora or anybody,” he said, speaking on television.

There was a certain system for fixing prices and nothing was done without expert advice, he said.

“(Kejriwal) thinks that it’s just like taking water through a bucket from a well. He cannot take the oil like that.”

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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