Response to article in Financial Express Jairam Ramesh June 26, 2005 – Gujarat Chief Minister Narendra Modi announces that Gujarat State Petroleum Corporation (GSPC) has discovered more gas in the Krishna Godaveri basin (KG) than what the entire country was producing at that time – reserves of 20 trillion cubic feet, worth Rs Two lakh twenty thousand crores.
Promises the nation that production will start by 2007 at an additional investment of Rs.1500 crores and India will soon be energy independent, thanks to GSPC. May 5, 2016 – GSPC is yet to start production of gas from the KG basin block. Just last week, the company announced, for the umpteenth time, that it will start production soon.
It has borrowed Rs.19,716 crores from banks. It has written off Rs.3000 crores in exploration costs in KG. The company has to pay interest of Rs.1800 crores in 2015 alone on its loans.
Its profits before tax and interest was only Rs.30 crores. These are indisputable facts available in public through the annual reports of GSPC and Comptroller & Auditor General (CAG) reports. It takes an enormously biased or an incredibly naïve view to argue that something is not fishy here.
The only way to defend this is to deflect attention using technical mumbo-jumbo. This is precisely what this does – “Jairam Ramesh and the Congress are looking at the wrong figures on GSPC! There is no Modi scam”, May 5 Financial Express.
Read Sunil Jain’s Column: Jairam and the Congress are looking at the wrong figures on GSPC! There is no Modi scam
Here is a point by point response to the supposed rejoinder to my series of articles published in the Hindu. 1. FE Claim – “Tuff Drilling had partners who had the experience and that, in any case, since it didn’t deliver, its contract was cancelled” Response: Tuff Drilling, a company that was incorporated after the announcement of the gas discovery with deep experience in apparel manufacture was given the few hundred crores contract to supply platform rigs for this sophisticated KG basin operation.
The justification – one of its partners had experience in gas exploration. Perhaps the author of this is privy to certain details that the CAG and the nation are not. Lo and behold, the apparel manufacturer turned gas explorer failed to deliver on the contract. The justification – the contract was cancelled after wasting a year and no monetary loss to GSPC, so it’s OK.
Fairly loose argument here. 2. FE Claim – “Contrast this what the Gujarat industry minister Saurabh Patel said there was in the KG Basin fields. Someone’s clearly got it very wrong” Response: Numbers quoted in my original article are actual data produced from the company’s own annual reports. I relied on actual proved reserves as outlined in the company’s annual reports because that’s the more objective one rather than estimates of future probable reserves.
Yet this author would rather rely on the Gujarat Industry Minister’s statement about amount of GSPC’s KG Basin gas reserves. Recall, this is the same Minister who was part of the 2005 Modi government in Gujarat that made the grand announcement of GSPC’s gas reserves. 3. FE claim – “the total reserves in the entire block are likely to range from 8,992 bcf to 23,104 bcf and, of this, the recoverable portion ranges from 4,855 bcf to 11,848 bcf.
This is where the Modi/Saurabh Patel numbers are coming from” Response: This author quotes a “likely estimate” of reserves rather than the actual proved reserves in producing wells as quoted by the company in its annual reports. One would think that 11 years and Rs.20,000 crores later, it is perhaps not a wise decision to rely on likely estimates or media statements of ministers regarding GSPC.
While one can slice and dice numbers the way they want but I don’t think even this author can refute that even by the most optimistic estimates of gas reserves likely to be found in the future in the KG basin, it is still a far cry from the 20 trillion cubic feet as claimed by GSPC in 2005. The entire point of my original article is to show how proved reserves has fallen every year while borrowings have gone up every year. It is pointless to argue if my numbers of proved reserves from the company’s reports match those of provable reserves quoted by the company.
It’s the trend, not levels as Keynes would say. 4. FE Claim – “Getting the gas out, it is true, is not going to be easy and GSPC is already way behind target. Indeed, other companies such as RIL have also had huge difficulties and even roped in BP Plc as a partner to get its expertise.” Response: Now comes the defense that gas exploration is a tough business and requires “expertise”. A realization that’s again 11 years too late, no? Whichever way one slices and dices the data, it is quite obvious to all that India is still not energy independent as promised by the Gujarat Chief Minister in 2005 and GSPC is not the company that has catapulted Gujarat into an “economic super power”, as predicted by the Chief Minister. What was supposed to be a 10 trillion cubic feet of gas produced at a cost of Rs 1,500 crores by 2007 is now a mere one tenth produced at a cost of Rs 20,000 crores in 2016.
It is clearly not a simple case of a business decision going awry. It is abundantly clear from the series of incidents that a state owned company was exploited by the Gujarat state government in the garb of adventurous gas exploration to borrow money recklessly through public sector banks and squandered away. Instead of feeble attempts to defend the indefensible, the nation would be better served with an independent inquiry into the missing trail of Rs 20,000 crores of Indian savers’ money.
