Expert speak

For a level playing field

Print edition : March 20, 2015

A drill rig under construction in Kashagan oilfield in the northern Caspian Sea, Kazakhstan. State-run ONGC Videsh has agreed to pay about $5 billion for 8.4 per cent stake in the Kashagan field. Photo: REUTERS

Corporate espionage, which has been going on for years, leads to an information asymmetry in the market, privileging a few. Which is why the leaks in the system need to be plugged. Interview with Sudha Mahalingam, energy security expert.

SUDHA MAHALINGAM, formerly a journalist with BusinessLine and Frontline, is an independent energy consultant. She was a full-time member of the Petroleum and Natural Gas Regulatory Board, India’s downstream hydrocarbon regulatory body, for five years since its inception in 2006. In her capacity as an energy security expert, she also served as a member of the National Security Advisory Board. She has been a Visiting Fellow at the Elliot School of International Affairs, George Washington University, and serves on the Scientific Advisory Board of Next Generation Infrastructure Networks at Delft University, The Netherlands. She has been a guest faculty at the Lal Bahadur Shastri National Academy of Administration, Mussoorie, the National Defence College, New Delhi, and the Foreign Services Institute, New Delhi, among others. Throughout her career, she has focussed on energy issues and her interests encompass the geopolitical, economic, pricing, environmental and regulatory dimensions of all forms of energy, including oil, gas, nuclear, hydro, coal and renewable. In this interview, she explains the issues involved in the controversy over corporate espionage.

Is it not the duty of a journalist to get information through whatever means possible in order to inform his/her readers?

Journalists certainly have the duty to try and access information through various sources and methods but that does not put them above the law. Besides, it must always be remembered that the means are as important as the ends. Most crucially, the information accessed by a journalist should be used solely for informing the readers and for advancing the public interest and knowledge. Unlike others, journalists have fairly unfettered access to the corridors of power and many have cultivated valuable sources over a long period of time. But, a journalist must always remain true to her profession and cannot use this access to become an intermediary between stakeholders or to trade in information for private profit, which is what is alleged in the present case.

In today’s scenario, how do you think leakage of government documents benefits corporates? Can you give some specific instances?

The petroleum industry is very large in terms of turnover and assets. It is one of the largest in terms of revenues and potential profitability. It is among the largest contributors to government revenues, both Central and State. It is linked closely to food security and environmental security as well. Petroleum is also ubiquitous in our everyday life—cooking, transport, freight, etc.—and, as such, the stakes are high for all stakeholders but even more so for corporates whose investments in the industry can run into thousands of crores of rupees. Therefore, most decisions and policies of the government can impact the balance sheets and profitability of the companies in the sector.

The other point to note is that more than two decades after liberalisation, the industry continues to be dominated by the public sector. There is a perception that government policies still favour the public sector.

It is more than two decades since the Government of India decided to liberalise the petroleum industry and leave pricing and supply decisions to market forces. But, despite its stated intent, the government has not been able to let go of the control of the industry which, it seems to realise, is too strategic to be left entirely to market forces. Government decisions on policy, pricing, energy infrastructure, and so on and regulatory decisions on tariffs have huge implications for corporates, which is why companies might want to gain access to confidential information and documents through means fair or foul.

For instance, the Government of India is locked in an arbitration battle over upstream production costs in oil and gas fields operated by corporates. The government’s thinking on the choice of the arbitrator, the strategy to be adopted by it in the arbitration proceedings, etc., ex ante, would be of enormous value to the adversary party.

Similarly, the government’s thinking on the pricing of natural gas, which does not have a global benchmark, can be a critical input in corporate decisions for companies engaged in gas production and supply. The crude oil procurement decisions of government-owned oil companies would be of great interest to shareholders of foreign companies exporting crude oil to India.

Budget proposals which contain information on proposed levies and taxes on petroleum are of critical importance to companies engaged in the production, refining or marketing of petroleum products, as well as to consumers. Therefore, the ability to access these proposals at the stage of formulation itself can confer unintended advantages to those who succeed in getting hold of them. Also, in a competitive environment, access to government policies at the stage of policy formulation can give an edge to a corporate that may be in a position to influence such policies.

Why do you think the government remained a mute spectator to such leaks all these years? Was the government helpless or was there a quid pro quo involved?

In my view, it was not serendipity that led to the detection of these leaks at this point in time.

That documents were being leaked from the Petroleum Ministry over a long period of time is a well-known fact. Often, entire government reports would be published even before they were officially released. What we do not know, however, is the extent of information that was accessed but withheld from publication, to be used entirely for private benefit.

Government officials in the Ministry could not have been oblivious to these leakages. Yet, all these years, there was no effort to identify the source of leaks and stop them. We all remember how a senior executive of a large corporate house was caught with confidential Cabinet notes. Yet, all these years, nothing seems to have been done to correct the system, leave alone take appropriate action against the executive or the officials responsible for the leaks.

Certainly, some officials in the government would have been complicit in the leaks, but to say that the government itself was silent because there might have been a quid pro quo is perhaps stretching the argument.

Newspaper reports state that even public sector undertakings (PSUs) were clients of such dubious consultancies. Do you think PSUs too benefited from such leaks? If they did, how?

From what I have read, PSUs have supported conferences organised by these consultancies. As the Petroleum Minister has stated, supporting events or seminars or participating in these events is not tantamount to authorising the consultancies to indulge in dubious practices. That said, it is a matter of concern that there is scope for conflict of interest when a newspaper or a web-based industry magazine regularly and routinely organises networking events sponsored by the same corporates, whether public sector or private, who are the subject matter of their news reports and analyses.

PSUs have as much at stake as private corporates in their need to keep ahead of the competition. It would be reasonable to assume that they would also be keen to access confidential commercial information, but may not be able to invest the necessary financial and other resources for the purpose, subject, as they are, to a greater degree of scrutiny and public accountability.

Do you agree with the view that the government should encourage transparency and proactively share information with corporates to avoid attempts to steal information? What does the government lose if it does so? Besides, being secretive leads to a vicious circle where a privileged few with vested interests benefit in an opaque decision-making process.

Certainly, the government must endeavour to be as transparent as feasible and share information with corporates. There has always been a tendency to hold on to all information, whether confidential or not. That said, certain categories of information, such as commercially sensitive information or those that would impact the interests of the government, not to mention information that would have a bearing on national security, cannot be shared. Proposals for industry-related taxes and levies that go into the annual Budget cannot be shared ex ante. While the government must and often does conduct stakeholder consultations while formulating policies, once a decision has been made, the announcement of the final policy must be shared simultaneously with all the stakeholders so that no single stakeholder derives any undue advantage or has the chance to manipulate it. File notings and the internal deliberations that go into policy-making cannot be shared since revealing the dissensions and arguments within the government will weaken the policy and jeopardise its implementation. Considering the size and importance of the industry, there are certain types of information/reports/documents, access to which should be restricted within the government or the statutory regulator. But being needlessly secretive does lead to opaqueness in decision-making.

Who decides what is classified information? Who has the power to classify information, lower-level babus or some designated officers? Should decisions about what is classified and what is not be challengeable? Should all policy decisions be out of bounds to the media?

I believe the decision to classify or release information is taken at a responsible level within the government. If the power to classify information is delegated, such delegation would be based on clearly enunciated principles. However, since even routine information is perceived to be valuable, there might be a tendency in the lower levels of the bureaucracy to needlessly resist sharing such information.

In fact, as far as the Petroleum Ministry is concerned, over the years, a lot of information has been routinely put on the Ministry website. However, what is not always available on the website/press releases becomes the justification for arriving at a certain decision as opposed to an alternative.

Surely, decisions as to what information is classified or what is not should be challengeable. Not only policy decisions, but also the rationale for deciding a certain policy in preference to an alternative should be accessible to the media.

If it is necessary to secure such classified information, how effectively can it be done? Should standard operating procedures be amended to restrict unauthorised access?

It is obvious that the current standard operating procedures for securing classified information are not effective. The practice of sending paper copies of documents from one desk to another or from one officer to another, possibly through multitasking staff, is not exactly the most secure procedure. In an organisation like a Ministry, where a string of officials are involved in decision-making, it is difficult to limit access to documents to only a select few. As we all know, while Budget proposals are being prepared, the key people engaged in the exercise are locked in until the budget is finalised for presentation to Parliament.

However, it is not feasible to adopt this practice across the board for all kinds of decisions. Technology can take care of leaks to a considerable extent. The Prime Minister has been trying to implement a paperless administration, which could go a long way in preventing leakage of documents.

The arrest of lower-level multitasking staff at the Ministry masks the fact that these documents could not have leaked without the involvement of higher officials who know the value and worth of the information contained therein. How does a multitasking staff know which of the numerous documents lying around in locked rooms of officials is valuable enough to be copied and stolen? Clearly, someone higher up picks them out and leaves them there to be photocopied. Investigation into the leaks will hopefully address this issue.

What are the wider implications for the government and industry?

The industry is much larger than the few corporates who seek to acquire unfair advantage through means that are, if not illegal, certainly not above board. A truly competitive market cannot operate when there is information asymmetry, for whatever reasons. Many players in the industry have been genuinely aggrieved at the unwarranted information asymmetry that disadvantages them. Plugging the leaks will restore balance in the industry. The government, instead of taking the moral high ground, should introspect why it allowed such leakage to go unchecked all these years. Instead of making scapegoats of a few lower-level functionaries, the government must fix responsibility at the appropriate level, plug the leaks and put in place a robustly secure system to safeguard classified information. If the government is serious about inviting foreign investments, it cannot be seen to be less than neutral. We need to avoid the danger of going back to the status quo once the media glare is deflected to some other breaking news.

Do you think the remedy lies in legalising lobbying and allowing licensed lobbyists to present their cases to the government?

No, I do not think legalising lobbying is the answer. Even in the existing system, there is scope for all stakeholders to present their cases during the stakeholder consultation processes that precede almost all major policy decisions made by the government or the statutory regulator. Television debates and newspapers, through op-ed columns, also provide ample forum for lobbying. If we legalise lobbying, corporates with deep pockets and better political networks will have undue advantage over smaller players.

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