Jaipal Reddy’s challenge PDF Print E-mail
Thursday, 27 January 2011 00:00
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Maharashtra chief minister Prithviraj Chavan has ordered an inquiry into the burning of additional district collector Yeshwant Sonawane while he accosted people stealing kerosene, so presumably his killers will be brought to justice. The real issue, however, is there is a mafia operating outside each oil depot in the country, a mafia that has its roots so deep in the political establishment that, many years ago, the oil ministry even abolished its anti-adulteration cell, leaving it to each oil company to have its own cell—that is why, under normal circumstances, no officer goes to a depot without police protection (Sonawane had gone near the depot to talk to farmers holding a protest against onion prices). The responsibility for this, like it or not, rests with the Cabinet, which prices kerosene at around Rs 9 per litre vs diesel at around Rs 38—that’s Rs 15,000 crore waiting to be grabbed if you assume, optimistically, that just half of the 10 mn tonnes of kerosene sold is used to adulterate diesel with. So, whether it is a Manjunath or a Sonawane, whoever comes in the way just has to be eliminated. And no GPS, no markers to identify PDS kerosene, no tamper-proof Abloy locks can help, the prize is simply too high. Raising prices of kerosene (and giving the poor cash transfers instead) is the only way to fix the issue—this still leaves the oil PSUs in trouble as they lose around Rs 8 per litre on even diesel sales (Rs 19 on kerosene), but that’s a separate issue. Since Murli Deora had limited success, the task falls on his successor Jaipal Reddy.


Reddy’s other task is to fix the Cairn-ONGC mess Deora left him with. Anil Agarwal’s Vedanta bought a majority stake in Cairn India, but Deora’s ministry didn’t clear the deal for nearly six months. The argument is that, as a partner with Cairn, ONGC will have to pay Rs 12,000 crore by way of royalties (and that’s assuming oil remains at $60 a barrel!) on the oil discovered by Cairn till 2020—so now that Cairn is changing hands, and at a huge profit, why not get Cairn to pay? The argument is specious since, when Cairn entered India, no oil major wanted to come in, so the government sweetened the deal and said, in return for an equity share, ONGC would pay the royalties. It is true the agreement has worked against ONGC, but an agreement is an agreement. Which is why, way back in 1998, a Group of Ministers had said the government would make good this loss, but no agreement has been reached so far—why should Cairn have to pay for this? The ministry has already discouraged investors by arguing in the Mukesh-Anil Ambani fight, and the Supreme Court ratified this, that it owns the oil/gas fields operated by private firms, so only it can decide on who will buy and at what price. Jaipal Reddy’s task is hardly enviable.


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