The environment ministry and petroleum ministry have collectively failed in addressing this problem and its overall impact on the economy of AP (Andhra Pradesh). As a result of the acquiescence on the part of the regulating ministries and the state government, RIL has not cared to identify the magnitude of the problem as it is primarily interested in quickly recovering its investment and earning windfall profits without addressing the larger destruction that is wrought on the environment of the region and the economy of the state.
It is distressing that the state government should become a passive abettor of this unlawful activity ….. I request both the state government and the Central ministries to appreciate the impending crisis in the KG delta area and wake up to the realities as responsible actors under the Constitution.
This letter too met with a similar fate: it received no reply. What happens now that three years have gone by since the MoEF sub- committee submitted its report? Is it going to be ‘business as usual’? Prof Krishna Rao has not lost all hope. ‘People are just beginning to experience the effects of subsidence. Soon they will be forced to migrate in search of a livelihood as they are deprived of food and drinking water,’ he said, adding that what is a trickle now could turn into a tide of exodus of people from the region. ‘It will soon become a people’s movement… If government agencies do not intervene soon, people will start taking things into their own hands,’ he warns.
Dr Sarma, an avid environmentalist who has written an eBook Will the sparrow ever return? was miffed with the MoEF sub-committee’s report. He said in this regard:
The MoEF is perhaps reluctant to upset the applecart of the developer! Already, RIL is trying to show a very high investment figure not commensurate with the production profile … and is trying to drag the government into unnecessary arbitration. There was apparently some collusion between the MP&NG (Union ministry of petroleum & natural gas) officials and the company as indicated by the reports on the ongoing CBI (Central Bureau of Investigation) investigation.
Dr Sarma also felt that the Andhra Pradesh High Court’s order had exposed the MoEF:
It did not do what it was required to do… The logical action would be for the MoEF to crack the whip of regulation, undertake a comprehensive study to prove or disprove subsidence ... and impose safeguard measures on the developer. If there is subsidence, the developer will be forced to invest on safety measures .... Ironically the state government too has adopted an indifferent stance though the project threatens its economy.
Dr Sarma emphasised the following aspects of what has happened in the KG basin. The Environment (Protection) Act of 1986 has laid down a procedure for the preparation of a statutory environment impact assessment (EIA) study. These include a mandatory public hearing at the location of the project and an appraisal of the project by an expert committee. Only thereafter, can the MoEF accord environment clearance to a project. Official manuals specify that not only is an assessment required for each individual project; a cumulative EIA is required to assess the environmental impact of a specific project in conjunction with the other projects in the vicinity. In this instance, no such cumulative assessment was done nor any attempt made to look into the possibility of subsidence as is evident from what has happened in other parts of the world and in India as well (there are references in the sub-committee’s report to the studies conducted on land subsidence in Rajasthan and Gujarat).
Besides Prof Krishna Rao and Dr Sarma, another individual concerned about the environment expressed surprise at the silence of the scientific community on the issue of subsidence. This person is Dr T. Patanjali Sastry who lives in Rajahmundhry and heads a non- government organisation called Environment Centre. Dr Sastry who has served as a member, Andhra Pradesh Coastal Zone Management Authority (CZMA) describes Prof Krishna Rao as a friend and a whistle- blower. He says about the silence on the part of the state’s scientific community, ‘nobody bothered to respond’ and laments that many scientists ‘rarely display any social responsibility’.
Dr Patanjali Sastry pointed out that the ‘CZMA on its own did not initiate any action, the reason being oil exploration, laying of pipes, mining for rare minerals etc are permissible activities as per the Coastal Regulation Zone (CRZ) norms’. The authority, he said, was mostly engaged with violations of CRZ regulations and was ‘waiting for the report of the expert committee’. Dr Sastry said land subsidence and ingress of sea water are ‘different issues in spite of causal linkage’. He wrote to this book’s authors:
I was not aware of any subsidence in this area other than (through) Prof Krishna Rao’s observations... subsidence of land is a geological probability. I understand it may happen when water is not fed into the abandoned wells on shore. As per off shore extraction I feel we need a lot more evidence to directly connect subsidence to gas extraction. I believe such probable occurrence and consequent ecological damage should have engaged the MoEF (the Union ministry of petroleum & natural gas) and (the) Mines and Geology establishment (of the state government) the day the exploration began. The Andhra Coastal plains are narrow and demographically dense. The area is very fertile rice country too. So serious scientific investigation is long overdue in the interest of exploration itself. In the absence of irrefutable evidence people get scared and may turn against gas exploration.
Eight revenue mandals (zones) close to the sea in the central delta suffer (from) ingress of sea water. Ground water withdrawal for irrigation has been banned there years ago. The ingress was owing to excessive exploitation of ground water. I have no science background. So I cannot definitely connect the sea ingress to gas extraction. But I discussed the problem with geologists who have experience in the field. They denied the possibility citing soil formation in the central delta, the very reason Prof Krishna Rao said facilitated land subsidence.
I agree the sub-committee’s report failed to take a stand and is certainly self contradictory. But many such reports resort to the same linguistic ambiguity... the MoEF should have formed an expert group to investigate further. It is important to know the truth since what is involved is very precious national wealth on one hand and a preventable disaster on the other. It is a difficult choice for the political establishment, understandably. But truth must prevail. Though dissimilar I am reminded of Prof Madhav Gadgil’s report on the Western Ghats which the government had tried to bury. Now they (meaning the MoEF, have) formed another committee to complete the funeral. As for land subsidence, another judicial intervention might expose the reality.
When asked questions about land subsidence and ingress of sea water, executives of RIL told the lead author of this book that they had nothing to say on the subject and that they were not aware of the findings of the sub-committee of the MoEF.
As already pointed out, the KG deltaic region is an agriculturally fertile tract that forms the lifeline of Andhra Pradesh’s economy. Dr Sarma sarcastically suggests that the project developer (RIL) was far too influential for the MoEF to raise such ‘mundane concerns’. He said EIA reports are prepared by consultants who are paid for and appointed by the project developers. In a majority of cases, the consultants write what the developers want them to. In this instance, a good consultant could have flagged the issue of land subsidence, collected data and/or suggested a detailed investigation by experts. The concerned consultant raised no such issues.
Under such circumstances, Dr Sarma and Prof Krishna Rao contended that a fresh public hearing needs to be conducted in this case to explain the ‘real position’ to local people. They repeatedly point out that the MoEF sub-committee has not ruled out subsidence. It merely suggested that a more detailed study should be carried out by the Indian School of Mines. Further, the sub-committee suggested that monitoring of levels of subsidence be undertaken and that comparable measurements be made. Neither the MoEF nor the petroleum ministry has bothered to follow these recommendations. Are they waiting for a court order to direct them to do what they should have done on their own?
Like Prof K
rishna Rao, does Dr Sarma feel lonely and frustrated, as if he is fighting a losing battle? When asked this question at his home in Visakhapatnam, he replied:
I feel distressed at the MoEF’s response. I have pointed out numerous instances of EIA reports that blatantly suppress information. I have brought to the MoEF’s notice specific EIA reports that have plagiarized whole chapters and paragraphs from other reports, a cut-and-paste job (done) in (a) … hurry to please (the consultants’) … paymasters. Not a single one of them has been blacklisted though what they did amounted to a crime. Public hearings have become farcical. Many Environment Clearances (ECs) are given on the basis of fraudulent reports. (Members of certain committees that grant)… ECs have …a clear conflict of interest…Still, I am optimistic…
How long will the likes of Prof Krishna Rao and Dr Sarma be able to hang on to their optimism? Will they receive support from more people who reside in the ‘rice bowl’ of Andhra Pradesh in KG basin? Will concerned human beings be able to save the region from the rising waters of the ocean on account of global warming? Ten million people and 10 million tonne of rice. As gas wars rage between crony capitalists, the answers to these questions are not known. Your guess could be as good as ours.
10
INDIAN STYLE CRONY CAPITALISM
When you reach for the sky, expect those on the ground to scrutinise you more intensely as you ascend the economic ladder. Symbolic of this statement is Antilla, the 570-feet-high building that scrapes the skies of Mumbai, rising contemptuously over clusters of slums and shanty tenements. Built at an estimated cost of nearly two million US dollars, this is Mukesh Ambani’s show of flash, along with the ‘Mumbai Indians’ team of the Indian Premier League cricket tournament. But flash gets panned. In an essay in Outlook (26 March 2012), author and activist Arundhati Roy went after Ambani’s towering ambition:
By calling their tower Antilla, do the Ambanis hope to sever their links to the poverty and squalor of their homeland and raise a new civilisation? Is this the final act of the most successful secessionist movement in India? The secession of the middle and upper classes into outer space? As night fell over Mumbai, guards in crisp linen shirts with crackling walkie-talkies appeared outside the forbidding gates of Antilla. The lights blazed on, to scare away the ghosts perhaps. The neighbours complain that Antilla’s bright lights have stolen the night.
Perhaps it’s time for us to take back the night.
Roy, of course, may keep burnishing her anti-big business credentials. But that’s not the case with Tata group chairman emeritus Ratan Tata, who was quoted musing by the Times newspaper of London:
It makes me wonder why someone would do that. That’s what revolutions are made of. The person who lives in there should be concerned about what he sees around him and (asking) can he make a difference.... If he is not, then it’s sad because this country needs people to allocate some of their enormous wealth to finding ways of mitigating the hardship that people have.... We are doing so little about the disparity. We are allowing it to be there and wishing it away.
Tata’s reported remarks apparently expressing surprise at fellow industrialist Mukesh Ambani living in Antilla sparked off a controversy on 22 May 2011, the day after the newspaper published his purported comments. An official spokesperson of Tata Sons issued the following clarification:
There have been words, individuals and statements that have not been mentioned by Mr Tata during the course of the interaction which are being attributed to him. We have already registered our protest with the concerned publication and will continue to pursue measures against the incorrect impressions being sought to be created.
Antilla was not the only Ambani edifice showing metaphorical cracks. Among those drilling deeper into the Ambani empire was Neeraj Monga, executive vice-president and head of research for the Toronto, Canada-based forensic accounting firm, Veritas Investment Research. Monga’s analysis sent ripples through the usual placid waters of the Indian corporate world, into which stones are rarely hurled. In fact, Veritas’ debut research of its new India-oriented group was provocatively titled ‘Brothers in Arms: Misappropriating a Fortune’. The laser focus was on Reliance Industries Limited and Reliance Communications Limited. It contained language that had possibly never before been used against major Indian companies:
Reliance Communications Limited… is the poster child of everything that is wrong with corporate India, and irrespective of management’s assertions about ‘values’ and ‘integrity’ in various annual reports, we find no credible evidence of either in its financial statements or those of its former parent, Reliance Industries Limited...
Sitting in his corner office in a building just off Bay Street, Toronto’s equivalent of Wall Street, the slight Monga had an inquisitive air that fitted him rather well. He explained the rationale behind the Reliance report to Toronto-based journalist Anirudh Bhattacharyya(who contributed to this section of the book):
I cover cable and telecommunications technology and I’ve been doing that for ten years. Also when Reliance Communications was spun out from Reliance Industries, I was just curious and I looked at their presentation of the spinout and, in their words, I think they were trying to rationalise the shareholding structure and create value. When I looked at the presentation, immediately I saw a slide and I said, this doesn’t seem right. But I said somebody in India is going to write about it because India is a big market and there are people looking at it. I was surprised over a period of four or five years, nobody actually talked about it or wrote about it. Ultimately when I said we can write about India, we could go back and dig deeper into that presentation.
What wasn’t right was this: It was the change in the ownership, related to Reliance Communications. When the company was spun out, the promoters’, the family shareholding went up from around 38 per cent to 63 per cent. That should not be possible because at the end of the day, if you own 38 per cent of an asset and you spin another asset out of that asset, you should end up owning only 38 per cent of that asset. How can you end up owning 63 per cent?
The Reliance report was released online, on the document-sharing site ScribD, in Hindi and in Gujarati, because Veritas reasoned that doing so would make it accessible to a substantial section of the small shareholders of Reliance group companies. Monga explained:
What we prove in our report is that this entire thing was done through dilution of minority shareholders which is a concept which is perhaps not very well understood in India. And perhaps nobody had the wherewithal and/or the skills and/or the time to dig and figure out what’s going on. And at that time, the market was also in a big boom time, stocks were high, people were really positive on global economy, they were really optimistic about the BRICS (Brazil, Russia, India, China and South Africa), all those things happened at the same time.
Though the Veritas report doesn’t dwell on the Krishna-Godavari project, 2011 and 2012 were years of setbacks for that ill-starred venture: output drops, cancellations, government penalties, arbitration, shareholder concerns and, consequently, sliding share prices. As the winter of 2011 wound down, the offshore gas-fields promised much more to Reliance. In fact, global dynamics appeared to be favouring Mukesh Ambani. As the United States started squeezing Iran, the rise in the prices of fossil fuels, including natural gas, gathered momentum. Reliance complained of discrimination as the Indian government procured gas at higher rates from overseas suppliers, at that frozen moment, nearly three times what the government had set as an administered price, with estimates ranging upwards of $13 per mBtu of liquefied natural gas for March 2012 delivery. In a letter to the government, Reliance Industries argued: ‘We wish to exercise our contractual right to market natural gas on the basis of arm’s length competitive sales to the benefit of all parties, including the government.’
The Prime Minister’s Office was considering legal opinion before undertaking a hike. A letter to petroleum secretary G.C. Chaturvedi asked him to ‘consider obtaining legal opinion on the ma
tter’ and to refer to the scheduled meeting of the empowered group of ministers or EGoM on gas. The 6 January 2012 letter from Reliance offered a 90-day window for reaching an amicable settlement. But much would occur within that quarter to alter the narrative. By the end of March, it had been established that the ministry of petroleum and natural gas (MoPNG) was opposed to ‘any’ increase in the administered price of natural gas, not just a ‘substantial’ one. Though the EGoM had stated in its 24 February 2012 meeting that the law ministry, in consultation with the attorney general of India, could rule on the legality of a hike, global conditions were playing up against Reliance’s expectations. With the exchange rate of the rupee struggling against the dollar, the Euro-zone in deep crisis, global economic recovery still fragile and India’s fiscal deficit escalating, the government was reluctant to add another $9 billion to its already loaded subsidy bill. For instance, the Association of Power Producers had warned that the power subsidy would climb by 50 paise for every dollar hiked for gas sourced from KG-D6.
The hits kept coming, one blow followed another. Reliance and its British partner BP plc had sought permission from the government to undertake concept validation in 16 gas discoveries in the D6 block, but their request was turned down on 20 April 2012. The Block Oversight Committee led by the director general hydrocarbons contended that ‘pre-development investments can only be done in fields which have either been proved to be commercially viable or whose field development plan has been accepted by the authorities’, according to the official sources who spoke to the Press Trust of India on 23 April. The argument in the ministry was that if such investments failed to provide dividends, it could impact the bottom-line of the exchequer. That was perhaps a smart call, given that output in the explored blocks was by then already flagging. For the week ending 1 April 2012, the level of production from the D6 fields dropped by 0.20 million standard cubic metres per day (mscmd), to 33.89 mscmd, a status report submitted to the ministry revealed, and that included output of 6.37 mscmd from the MA field in the KG basin. Water and sand ingress continued to plague output, which had peaked at 61.5 mscmd in March 2010.
GAS WARS: CRONY CAPITALISM AND THE AMBANIS Page 27
