Cover Story

Reliance factor

Print edition : March 21, 2014

M. Veerappa Moily, Union Minister for Petroleum and Natural Gas, with RIL chairman Mukesh Ambani (left) and Bob Dudley, group chief executive, British Petroleum, after a meeting at his residence in New Delhi in October last year. Photo: subhav shukla/PTI

Arvind Kejriwal at the press conference in New Delhi on February 11 during which he came down heavily on Reliance Industries on the issue of raising the price of natural gas. Photo: PRAKASH SINGH/AFP

Aam Aadmi Party leader Arvind Kejriwal’s campaign against crony capitalism with focus on the Reliance group and its close relationship with the two main political parties, the Congress and the BJP, snowballs into an electoral debate.

QUESTIONS relating to India’s biggest private sector corporate conglomerate, the Reliance group, especially with regard to the stupendous growth of the company and the methods employed for it by its founder Dhirajlal (Dhirubhai) Hirachand Ambani and his two sons, Mukesh Ambani and Anil Ambani, have come up in India’s political, economic and media spaces periodically in the past three decades. The debates on these questions have almost always dealt with the extent of influence the group has wielded with the instruments and systems of governance in the country. The manner in which the company and its leaders have manipulated these systems as well as the political and administrative leaderships that control them has also figured time and again in the allegations that have emerged as part of this debate. These debates have sometimes disrupted the proceedings in Parliament for considerable periods of time, caused disturbances in the functioning of the administrative mechanisms, and given rise to sustained legal battles.

But, the kind of media focus that the Reliance group has received in recent times, especially in the context of the coming general elections, goes beyond all past records. The operations of Reliance Industries Limited (RIL), the flagship company of the group, and the various other companies of the promoter group as well as its associates, have become a much-discussed election issue. Central to this unprecedented pre-election debate is the connection between the two major political parties, the Congress and the Bharatiya Janata Party (BJP), and RIL, and the many ways in which the top leaderships of both parties have facilitated and promoted the company and its interests. In the process, the political help that RIL has received over the decades through governance measures, including budget proposals, as well as by way of systemic oversight of legal and procedural requirements has come up. Also, a number of new controversies have sprung up in this context and several old cases are being revisited with renewed interest.

The principal reason for the renewed interest in RIL and its manoeuvres is the ingenious political initiative taken by the Aam Aadmi Party (AAP) and its leader Arvind Kejriwal during and after the party’s 49 days in power in Delhi between December 28, 2013, and February 14, 2014. During its brief tenure, the AAP initiated action against the companies promoted by both Mukesh Ambani and Anil Ambani. While its government lodged a first information report against Mukesh Ambani, Union Petroleum Minister M. Veerappa Moily, and several others on the issue of natural gas pricing, it ordered a Comptroller and Auditor General audit of the finances of the power company run by the Anil Dhirubhai Ambani Group in Delhi (see separate story). When the Congress and the BJP, along with the sole Janata Dal (United) Member of the Legislative Assembly, voted to deny permission for the presentation of the Jan Lokpal Bill by the AAP government on February 14, Kejriwal contended that the two main parties had joined hands because his Ministry had made bold to take action against the “biggest representative of crony capitalism in India” and the “nefarious profit-making games” of the Reliance group.

He was successful in raising this point emotively, presenting himself as a martyr at the hands of big business and corporate interests. Underscoring this image, Kejriwal went on to contend that the leadership of both the big parties were controlled by the Reliance group and followed this up by sending letters to the BJP’s prime ministerial candidate, Narendra Modi, and Congress vice-president Rahul Gandhi raising the issue of gas pricing as well as Reliance’s operations in the Krishna-Godavari (KG) basin. These letters have not evoked any response from the top leadership of the two parties. The AAP has highlighted this silence, too, as a clear indication of the grip Reliance has over both the mainstream parties.

The net result of all this is that Reliance’s operations in diverse fields of the economy, including industries and businesses in sectors such as energy, textiles, communication and media, are being analysed with renewed interest and interpreted in various ways. While sections of the educated middle classes are the main participants in this process, advancing views that criticise or justify Reliance, there is little doubt that the AAP campaign has taken this debate to demographic segments that have hitherto not engaged ardently with issues such as crony capitalism and corporate manipulation of governance and politics. Responses that this correspondent received from a group of domestic workers in urban Delhi’s Mehrauli region and from farmers in rural Pratapgarh in Uttar Pradesh since Kejriwal’s resignation were clear pointers to this. Bade log Kejriwal ko acha kaam karne nahi diya, lagta hai isko bada kursi mein bittana padega (Big people did not allow Kejriwal to do good work, seems like he will have to be placed in the big chair) was the refrain from the domestic workers in Delhi. Many agricultural workers and small farmers at Pratapgarh said their relatives in Delhi, who made a living selling vegetables, had told them about Kejriwal’s struggle against big business and that this would win him support in Uttar Pradesh, too, if it was replicated. Another interesting reaction was from a group of small and not-so-small industrialists and businessmen whose valued assets range from Rs.5 crore to Rs.1,000 crore. They asserted that the AAP and Kejriwal deserved encomiums for taking on an industrial giant which no political organisation had dared to touch.

It is not right to say that the AAP is the only political organisation to have raised issues relating to Reliance Industries or for that matter the larger issue of crony capitalism. The Left parties, led by the Communist Party of India (Marxist), or CPI(M), and the Communist Party of India (CPI) have systematically highlighted many of the issues and controversies now being raised by the AAP, at several fora, including Parliament. The late Dipankar Mukherjee of the CPI(M) was one of the first to raise the oil pricing issue in the Rajya Sabha in the mid-2000s. CPI leader Gurudas Dasgupta and CPI(M) leader Tapan Sen have followed this up in recent years. In the 1980s, Vishwanath Pratap Singh took on Reliance and Dhirubhai Ambani, both as Finance Minister and as Prime Minister, and in the mid-2000s, he challenged the land acquisition moves for a project promoted by the Anil Dhirubhai Ambani group in Uttar Pradesh. But these political initiatives did not acquire the status of an election issue as they have now.

Money laundering

As the campaign breaks new ground as a subject of electoral debate, the AAP has brought up a couple of Reliance-related issues that had not received sustained public attention earlier. One of these relates to allegations about money laundering through the foreign direct investment (FDI) route. This allegation has been made on the basis of a letter sent by the Indian High Commission in Singapore to the Indian government on August 31, 2011, requesting an investigation into Rs.6,530 crore sent to India by the Singapore-based Biometrix Marketing. The High Commission had stated that Biometrix Marketing was a one-room company that apparently did not do any business, had no assets and equity, and did not file income tax returns in Singapore, claiming to be a small company. Yet, it made a huge investment of Rs.6,530 crore, making it the single biggest FDI in India from Singapore.

The High Commission had also stated that this FDI had entirely gone to the Reliance group of companies in India with a major portion deposited in Reliance Gas Transportation Infrastructure Ltd (RGTIL), a company owned 100 per cent by Mukesh Ambani. The High Commission had further pointed out that Biometrix Marketing was controlled by Atul Shanti Kumar Dayal. The AAP campaign has it that Dayal is a front for Reliance and that he is a director in 32 Reliance group companies and promoter companies, which include entities such as Reliance Power Ventures Ltd, Reliance Enterprises Ltd, Reliance Petroleum Ltd and Gammon India Ltd. The AAP said the Congress-led United Progressive Alliance (UPA) sat on the information provided by the High Commission in order to protect Reliance and help it launder ill-gotten profits parked abroad. On its part, Reliance stated that these allegations had been raised earlier in judicial proceedings in the Delhi High Court and had been responded to by the company appropriately. It also added that Dayal was not the owner of Biometrix Marketing.

The AAP maintained that the UPA was violating various provisions of the agreement with Reliance on the KG-D6 block of natural gas to favour the company’s interests. It pointed out that under Article 4 of the agreement between the Central government and Reliance, the relinquishment of areas at the end of each phase of exploration was mandatory in order to facilitate re-auction and maximisation of public benefits. It also stated that the UPA government had consistently defaulted on implementing this agreement and that Reliance was allowed to enter phase III without relinquishing any part of the field, when it ought to have relinquished almost 86 per cent of the area. The party said it was the diktat of Moily in favour of the company that helped overrule all objections raised on the basis of prevailing agreements and rules of procedure.

Along with this campaign launched by the AAP, the BJP’s collusion with Reliance Industries, as reflected in the Niira Radia tapes (the telephonic conversation between Niira Radia and influence peddlers), has also come back into public focus in a big way. Of particular interest in this regard is the recording of the conversation between Niira Radia and N.K. Singh, Janata Dal (U) Rajya Sabha member and former Indian Administrative Service (IAS) officer. In this recording, N.K. Singh talks about the firefighting he was doing on behalf of Mukesh Ambani to prevent Arun Shourie from leading the BJP debate on the 2009 Union Budget in Parliament. His contention was that Shourie opposed the retrospective implementation of a tax concession that Finance Minister Pranab Mukherjee had announced in the Budget. The singular beneficiary of that tax concession was Mukesh Ambani’s company. The proposed concession was to allow 100 per cent tax deduction on capital expenditure incurred on setting up and operating natural gas or crude oil pipeline networks in the very first year. And given these parameters, there was only one favoured beneficiary of this “huge, unprecedented and unusual tax benefit”, and that was RGTIL.

N.K. Singh confides, in the conversation with Niira Radia, that if Shourie began the debate it would cause problems for Mukesh Ambani on the concession matter and that he was trying to change Shourie as the lead speaker. Subsequent events in the BJP did witness the change that N.K. Singh wanted to make in favour of Mukesh Ambani. Former BJP president M. Venkaiah Naidu became the lead speaker in place of Shourie. More importantly, he argued strongly in favour of the concession, saying: “The Bay of Bengal has become the new North Sea of India. Government departments should not be seen quarrelling whether mineral oil is a natural gas or not. Whatever concessions needed for infrastructure, exploration... are connected with the energy security of the country.” Following this, Shourie himself went on record that he was unceremoniously dropped as the lead speaker and stated openly that this was the result of lobbying by corporate interests. In other recordings in the Radia tapes, Mukesh Ambani is on record referring to the Congress as his own shop ( Congress to apni dukaan hai.), but the Rajya Sabha debate incident showed that the BJP was no less a dukaan of his.

While these issues have got revived in the wake of the AAP’s campaign, some controversies as old as those that arose in the early 1990s have come back into circulation. One of these refers to a statement made by B.N. Safaya, secretary to Satish Sharma, a Congress leader close to the first family of the party. Safaya was questioned about an investigation conducted by the Central Bureau of Investigation (CBI) on the Panna-Mukta oilfields controversy. The contract to explore this oilfield was given to a joint venture of Reliance and Enron Oil and Gas India Limited (EOGIL) when Sharma was Union Petroleum Minister in the P.V. Narasimha Rao government in 1993. The CAG had questioned the process of giving the contract and this had led to a CBI investigation. It was during this investigation that Safaya told the investigating team that Mukesh Ambani, on behalf of Reliance, was a frequent visitor at Satish Sharma’s house and to the Ministry office. He also added that Satu Raman, a representative of Dhirubhai Ambani and Mukesh Ambani, had delivered Rs.1 crore in June 1993, Rs.1 crore in October 1993 and Rs.2 crore in December 1993 in cash. Interestingly, nothing came out of the case. The CBI stated in the Supreme Court that the case files of the Panna-Mukta investigation were no longer traceable. Apart from the efforts made by the two big parties to help Reliance in all possible ways, there have been several instances of representatives of smaller parties such as the Samajwadi Party (S.P.) and the Janata Dal (U) taking sides with different segments of Reliance at some point or the other. The S.P.’s open association with Anil Ambani when he parted ways with his brother is well recorded. In fact, V.P. Singh’s struggle in 2006 against the S.P. government in Uttar Pradesh was on the grounds that it was favouring the corporate interests of companies such as Anil Ambani’s.

Clearly, the AAP’s current campaign has brought back into focus all these issues, emphasising the local dimensions to the corporate conglomerate’s influence in different parts of the country. While the central thrust of the party’s campaign is indeed the collusion of the two big parties with crony capitalism as represented by Reliance, the subtext that plays out locally in different parts of the country also castigates the smaller parties that have given to and taken favours from Reliance. It is still too early to say whether the issue will have a decisive impact on the election scene as it unfolds in the next two months. But there is little doubt that allegations against Reliance and a fight against crony capitalism have indeed become the central theme in the general elections. This marks a sort of paradigm shift both for the national polity and the country’s largest and richest industrial group.

This article was updated on March 11 to correct the reference "joint venture of Reliance and Essar" to read as " joint venture of Reliance and Enron Oil and Gas India Limited (EOGIL)".

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