The Supreme Court ruling has put an end to the row behind the KG Basin and Ambani brothers. Have affluent industrialists learnt a lesson or is India going to be a witness to more such face-offs?
The May 7 decision of the three-judge bench of the Supreme Court in the dispute between Reliance Industries Limited (RIL) and Reliance Natural Resources Limited (RNRL) has been widely interpreted as a victory for the first company headed by Mukesh Ambani and an ignominious defeat for his younger sibling Anil who leads the second firm. The third party in the dispute relating to the pricing and allocation of natural gas from the Krishna-Godavari basin off the coast of Andhra Pradesh was the Government of India, specifically, the Ministry of Petroleum & Natural Gas that had earlier been accused by Anil of having acted in a partisan manner in favour of Mukesh.
By implication, Anil also alleged that Union Minister Murli Deora had not been fair to him and his business interests--this was arguably one of the few occasions when a prominent businessman publicly claimed that a Cabinet Minister had been siding in favour of a particular interest group, in this case, a company headed by his elder brother. After the Supreme Court judgment, the Minister contended that the court had vindicated the Government's position. Deora stated: "The gas belongs to the nation…not to any company or individual. The Supreme Court has upheld our stand."
True, the apex court of the country came to the view that the private agreement between the Ambani brothers (two of the richest men in India) and their mother is not legally binding on the government and that the government has the right to determine how natural gas (as well as other resources that belong to the people of the nation) is to be priced and allotted. This is, however, only one side of the story. The court judgment that runs into 268 pages is, at the same time, a strong indictment of the government's policy of privatizing the country's natural resources.
Before elaborating on this aspect of the judgment, the backdrop is delineated. In July 2002, Mukesh and Anil's father Dhirubhai Ambani (who set up the Reliance group, India's largest privately-controlled corporate conglomerate from scratch) died intestate or without a will. In October that year, gas was discovered in the Krishna-Godavari basin by RIL. In June 2004, RIL entered into an agreement with the Uttar Pradesh Government to set up India's – and Asia's – largest gas-based power plant at Dadri, near Delhi, using gas from the Krishna-Godavari basin.
From November 2004 onwards for a period of over six months, the Ambani siblings fought bitterly. In June 2005, the brothers arrived at an uneasy settlement supervised by their mother--RIL got the gas extraction business while RNRL acquired control over the power generation business. But these are not personal fiefdoms of Mukesh and Anil. These are two widely-held corporate entities that, between them, have over three million shareholders.
The majority judgment of the then Chief Justice K.G. Balakrishnan and Justice P. Sathasivam said: "It is relevant to note that the Constitution envisages exploration, extraction and supply of gas to be within the domain of government functions. It is the duty of the Union to make sure that these resources are used for the benefit of the citizens of the country. Due to shortage of funds and technical know-how, the government has privatized such activities through the mechanism provided under the PSC (production sharing contract). It would have been ideal for the PSUs (public sector undertakings) to handle such projects exclusively. It is commendable that private entrepreneurial efforts are available, but the nature of the profits gained from such activities can ideally belong to the State which is in a better position to distribute them for the best interests of the people. Nevertheless, even if private parties are employed for such purposes, they must be accountable to the Constitutional set-up."
The minority judgment of Justice B. Sudershan Reddy added: "A small portion of our population, over the past two decades, has been chanting incessantly for increased privatization of the material resources of the community, and some of them even doubt whether the goals of equality and social justice are capable of being addressed directly. They argue that economic growth will eventually trickle down and lift everyone up. For those at the bottom of the economic and social pyramid, it appears that the nation has forsaken those goals as unattainable at best and unworthy at worst. The neo-liberal agenda has increasingly eviscerated the state of stature and power, bringing vast benefits to the few, modest benefits for some, while leaving everybody else, the majority, behind…"
"We have heard a lot about free markets and freedom to market. We must confess that we were perplexed by the extent to which it was pressed that contractual arrangements between private parties with the State and amongst themselves could displace the obligations of the State to the people…History has repeatedly shown that a culture of uncontained greed along with uncontrolled markets leads to disasters…Historically, and all across the globe, predatory forms of capitalism seem to organize themselves, first and foremost, around the extractive industries that seek to exploit the vast, but exhaustible, natural resources. Water, forests, minerals and oil – they are all being privatized; and not being satisfied, the voices that speak for predatory capitalism seek more…"
As for government policy, Justice Sudershan Reddy observed: "Before we part with the case, we consider it appropriate to observe and remind the GoI (Government of India) that it is high time it frames a comprehensive policy/suitable legislation with regard to (the) energy security of India and supply of natural gas under production sharing contracts."
It is apparent that the gaps that exist in the country's energy policy framework must be filled up soon. One such glaring gap is the architecture for pricing and allotment of natural gas. The key question that needs answering is whether the government is acting as a genuine custodian of resources that belong to the people of India or whether it is just helping promote the interests of affluent and influential industrialists? The answer to this question would determine if we in India are going through a phase of economic liberalization or crony capitalism.
Paranjoy Guha Thakurta
The writer is an educator and a journalist with 32 years of experience in various media—print, radio, television, the Internet and documentary cinema.
Disclaimer: The views expressed here are that of the author and does not represent the blog's.
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