Bone of contention

New Delhi, April 15: Crony capitalism is the pejorative phrase that has cast its baleful shadow over the general elections and the spectre isn’t going to vanish in a hurry.

That is because the new government — whatever its colour or stripe — will have to come to grips with the controversial formula, adopted by the UPA government in June last year, that would have doubled the price of natural gas to $8.40 per million British thermal unit (mBtu), with a knock-on impact on electricity rates, and fertiliser and steel prices across the country.

A new book “Gas Wars” — written by former journalist and independent television anchorman Paranjoy Guha Thakurta — has focused attention on the backroom machinations of Reliance Industries and how it was able to influence decision-making within the Manmohan Singh government on matters in which it had deep commercial interests.

The Election Commission had stayed the gas price hike but it will be on top of the agenda for the next government immediately after it is sworn in, Thakurta says in his book.

This is the third book launched in the last few days that attacks the Congress-led government for either inaction or on allegations of crony capitalism.

“What has been truly amazing about the controversies relating to extraction of natural gas from the Krishna-Godavari basin was the brazen manner in which the interests of the largest privately owned company in India were sought to be equated with ‘national interests’ by the government … only time will tell whether and if, the newly elected government will act differently from its predecessor,” Thakurta said.

The book points out that the Aam Admi Party and the Left had repeatedly alleged the Union government “was controlled by India’s richest man with the country’s two largest parties — the Indian National Congress and Bharatiya Janata Party in its pockets.”

Gas Wars traces how S. Jaipal Reddy, petroleum minister, in the UPA government from January 2011 to October 2012, had tried to thwart bids to raise gas prices.

In a note to the cabinet dated October 10, 2012, Reddy had pointed out that RIL had proposed linking gas prices to international crude price. The note said: “In brief, (a) $10 per mBtu increase in gas prices will result in $8.5 billion in revenue to the contractor (Reliance) in the next two years in case production remains constant … as most of the gas produced is being used by fertiliser units and power units (to) supply power to state discoms, the burden on state and central governments will go up by around $10.5 billion”.

The book details how late in the afternoon on October 27, Reddy was told over the phone that his portfolio would be changed the next day. Veerappa Moily, who eventually took over as petroleum minister, drafted a note for the cabinet committee on economic affairs, seeking a price hike from the $4.2 per mBtu, which was being paid to RIL and other oil companies selling gas.

It says that in a cabinet meeting held on June 27, 2013, minister of state for fertilisers, Srikant Jena, and minister of state for power, Jyotiraditya Scindia, sought to maintain the gas price at the $4.2 per mBtu level and “pointed to the adverse impact that higher prices of power and higher subsidies on fertilisers would have on the country’s economy.”

But ranged in favour of a price hike were the finance minister, deputy chairman of the planning commission and Moily himself, says the book.

“The meeting was, from all accounts, a rather stormy one … Prime Minister Manmohan Singh who heads the CCEA, is said to have maintained a stony silence … the neo-liberal group won the day.”