Spare a thought for oily tightrope Moily has to walk

Truth of matter: when it comes to RIL, everyone in our government is in a fix

prasanna

Prasanna Mohanty | November 7, 2012


Oil and natural gas minister M Veerappa Moily
Oil and natural gas minister M Veerappa Moily

The new oil and natural gas minister, M Veerappa Moily, is in a difficult position. In fact, every minister holding this portfolio is in so far as dealing with the Reliance Industries Limited (RIL) is concerned. Damned if you favour RIL and damned if you don’t. There have been several reshuffles. Mani Shankar Aiyer had to yield place to Murli Deora, considered a chum of RIL boss Mukesh Ambani, during UPA-I. There were whispers, but nothing much is known about the provocation.

In UPA-II, an upright Jaipal Reddy was shifted out and Moily took his place amidst a buzz that Reddy was not willing to bend and increase the gas price that RIL wanted. A news channel even ran a story saying that Reddy had bent and was willing to compromise days before his eventual ouster but it was too late in the day.

Now Moily has an unenviable task of striking a balance: How to hike the gas price without putting too much pressure on the exchequer or gas consuming public and private sector entities. Especially when RIL is not willing to come clean before the CAG which is bent on fixing it as far as excessive capital expenditure on exploration work that RIL claims to justify its demand for hiking gas price. Gas production is substantially down, adversely affecting gas-based power projects. A meeting proposed among CAG, RIL and the oil and gas ministry on October 31 had to be postponed because RIL is unwilling to submit itself to CAG’s performance audit.

What do Moily do? His dilemma is clearly reflected in his Monday’s statement: “I have already gone on record to say that it is a contractual relationship between the government and the respective contracting parties... Audit (of spending on oil and gas fields) is part of this (contractual obligation).”

“Let us not get into the immediate on this. Allow them (RIL) to make business... They will abide by that (contractual obligations). We need not create problems either for them (RIL) or for the government and CAG (federal auditor),” he added for good measure.

Read it and re-read it. Can you make a sense of what he is trying to say? He is saying RIL is obliged to fulfill the contractual obligations (which means it can’t claim a dramatic hike in capital expenditure in exploration work to seek hike in gas price). At the same time, he is also saying the applecart of RIL, arguably the biggest corporate player, can’t be disturbed without jeopardizing gas production and hence, power generation.

Where is the middle-ground? We don’t know. Nor does Moily, for that matter. Let’s hope clarity dawns sooner than later.

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